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Still Sitting on Your Tax Refund? Here's How to Put It to Work

1. If you’re just starting out

Do This: Focus on paying off debts.

Use your refund to pay off high-interest accounts like credit cards, says Brittney Castro, founder and CEO of Financially Wise Women, a financial- planning firm in Los Angeles. Next, Castro says, “create an emergency fund to guard against having to pull from long-term investments—and incur penalties—later.” Shoot to save three to six months’ worth of payments for necessities such as rent, food, utilities, and your car.

2. If you want to further your career

Do This: Look into continuing education.

Just be sure to assess your return on investment before commit- ting, says Tsai. How? Let’s say you’ve been working in marketing but you’re interested in coding. “A lot of coding schools have statistics about their job placements,” she says. “And talk to alumni and people who do what you want to do and ask them if classes would get you where you want to be.”

3. If you’re ready to invest

Do This: Turn things over to a robo adviser.

It’s an online, auto- mated wealth- management service that will do the investing for you. “Robo advisers make it easy to open a standard brokerage account and invest your money into their predetermined portfolios,” says Castro. She recommends some human interaction, at least in the beginning. Consider hiring a certified financial planner to help you set up every- thing and settle on an overall investment strategy, she says. Some robo advisers, like Ellevest, Betterment, and Wealthfront, offer financial planning with their service.

Click here for more articles from Time Inc.’s Looking Forward series.

4. If you’re nearing retirement

Do This: Increase contributions to your retirement plan.

“Once you’re 50, you’re permitted to contribute more to retirement plans, so take advantage,” says Tsai. If you can participate in a plan at work, consider upping your contribution in line with your tax refund (assuming you don’t already contribute the maxi- mum amount allowed). Whether or not you have a plan at work, think about putting your tax refund into a traditional IRA or Roth IRA—but first check IRS rules to understand your eligibility, recommends Tsai.

5. If you recently had kids

Do This: Contribute to a 529 college savings plan.

You’ll pay no federal or (usually) state taxes on returns or your withdrawals for IRS-approved education expenses. And you might be able to deduct your contribution amount from your state income tax, says New York City financial expert Wallis Wilkinson Tsai. Each state has its own plan, but you’re not limited to your state. (You could live in Florida, contribute to a plan in Utah, and send your child to college in New York.) Look for a plan with low fees and good investment performance; Tsai cites Utah’s plan and New York’s Direct Plan as two solid choices. Check tax rules: If your state gives a tax benefit only for its own plan, include that in your comparison. To compare plans, visit savingforcollege.com.

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