Tax refunds represent one of the biggest missed financial opportunities each year – and one of the most commonly wasted. In most recent years, the average American received around $3,000 back from the IRS, and most of it disappears quickly on forgettable purchases. What if you treated your refund as the wealth-building opportunity it could be?
The Refund Reality Check
Let’s be honest about what usually happens to tax refunds:
- 40% go to paying down debt (smart choice)
- 30% go to savings (decent but limited growth)
- 20% go to everyday expenses (missed opportunity)
- 10% go to vacation or large purchases (fun but temporary)
The problem? Even the money you earn from an investment in a traditional savings account barely keeps up with inflation. Can you remember where your tax refund dollars went last year? The year before? Your Central National Bank account now offers additional options to explore.
The Investment Growth Opportunity
Here’s what might happen when you invest that $3,000 tax refund in diversified portfolios:
Conservative Portfolio Growth (hypothetical 5% annually):
- 10 years: $4,886*
- 20 years: $7,960*
- 30 years: $12,965*
Moderate Portfolio Growth (hypothetical 7% annually):
- 10 years: $5,896*
- 20 years: $11,610*
- 30 years: $22,837*
Aggressive Portfolio Growth (hypothetical 9% annually):
- 10 years: $7,102*
- 20 years: $16,813*
- 30 years: $39,803*
*These are hypothetical examples for educational purposes only. Actual investment returns will fluctuate and may result in loss of principal.
Name Your Mix
A simple way to make the most of your refund is to treat it like any other part of your financial plan and give it a bit of structure.
Similar to a monthly budget, give each dollar a purpose. As already mentioned, paying off debt is a great use of tax refund money. The important thing is to start by deciding how you want to split your tax refund. Maybe you need to put 30% toward paying off that credit card debt or auto loan, which leaves 70% for investing. Or, for those without debt, maybe 20% is used for enjoyment and saving 80% to invest in your future feels more realistic. Perhaps you’re able and ready to go all in on investing! Once you’ve picked your mix, set up automatic transfers so the money goes straight into the right account before you’re tempted to spend it. Set a quick calendar reminder to check in on your progress once a year, and use each tax season as a natural, post-new-year-resolution moment. Revisit your goals and adjust your tax refund plan. Little habits like this make the whole process feel lighter and keep that once-a-year windfall working in your favor.
Digital Investing
We mentioned a new option to explore with Central National Bank. Our easy-to-use Digital Investing platform allows you to start investing directly from your Central National Bank online banking app with at little as $10, leaving you no reason NOT to invest in your tax refund “mix.” Plus, with Digital Investing you have access to professionally managed or self-directed investing options. You can be as hands-on in the selection of your stock options as you want or leave it up to a pre-built portfolio based on your own risk-preferences.
What does the tool look like? Here’s a link to a video preview: https://centralnational.com/whycentral/digital-investing.asp OR, check it out directly from your existing Central National Bank mobile app.
Your future self will thank you!
This article is provided for educational and informational purposes only and does not constitute financial, legal, or investment advice. The strategies and examples discussed are general in nature and may not be suitable for your individual circumstances.
Digital Investing is offered through Eko Investments, Inc. Eko’s “Investments as a Service” enables Central National Bank to offer digital investments directly on our digital banking platform. Investment products used by Eko are not deposits, are NOT FDIC insured, are NOT insured by any government agency, are NOT guaranteed by the bank, are subject to risk and are subject to possible loss of principal. Fees may apply. Visit https://centralnational.com/whycentral/digital-investing.asp for additional disclosures including Eko Investments, Inc. disclosures.