Tax season and the potential of a tax refund often bring a much-needed boost to many people's finances. They can receive thousands of tax dollars back depending on their incomes, deductions, and credits.

Using that money for short-term expenses is common, but there may be a better way to make the most of it. What if you had invested last year's refund instead of spending it? What if you had invested it in SPY?

The Average Tax Refund in 2024

The average federal 澳洲幸运5开奖号码历史查询:tax refund was $3,050 as of March 29, 2024. Refunds are typically issued when people overpay their taxes throughout the year via withholding or estimated tax payments. 澳洲幸运5开奖号码历史查询:Tax credits and deductions further influenꦍce the final amount of the refund. Tax deductions subtract from your taxable income. Tax credits subtract directly from what yo🔥u owe the IRS.

A refund can be🥂 a sizeable check for many, that they can put toward paying down debt or making a purchase. It can also provide 🍒a unique opportunity to invest in future growth.

Hoꦑw Much Yo💙ur Refund Would Be Worth Today If You Invested in SPY

SPY is an 澳洲幸运5开奖号码历史查询:exchange-traded fund (ETF) that tracks the performance of the 澳洲幸运5开奖号码历史查询:S&P 500, which includes 500 of the largest publicly traded companies in the country. It allows investors to gain exposure to a broad range of sectors and industries within the stock market through a single inve🎶stment.

The stock market can fluctuate in the short term, but the S&P 500 has consistently risen over the long term. SPY typically offers an annual return of 7% to 10%. The S&P 500 delivered a 10-year total return of 182.9% as of February 2025.

"If someone received a $3,050 tax refund and invested it into an index such as SPY late last March, say the 31st, their investment would have 🐈grown by about 5% to $3,302," said , LPL Financial Advisor and founder of Money Maven Financial.

"However, if they had done the same thing on March 31, 2022, they would have lost at least 11%, leaving them with $2,714. The stock market tends to deliver results for long-term investors but can be a tricky place to park money if you’re counting on an immediate return," she said.

What to Consider Before Investing Your Tax Refund in SPY🐼

Investing your tax refund in SPY can offer numerous benefits, b🧸ut this might not be the move for everyone. You may want to consider a few things before investing your refund.

• Financial Goals: Review your financial goals. Does investing make sense depending on what you want to accomplish and when? Or is there another way to put your tax refund to good use, like paying off a debt?

"The main question to ask is, when do you plan to use this money? If you plan to use it in the next one to three years, you’ll want to keep it safe and liquid, like in a high-yield savings account. If your timeframe is longer, you may choose to invest your funds in something that aligns with when you need the money and how much risk you’re comfortable taking," Burdick recommended.

• Current Financial Position: Assess your current financial position. Your tax refund could be your initial investment in this financial safety net if you don't have an 澳洲幸运5开奖号码历史查询:emergency fund.

"Investing your tax refund in SPY can provide potential growth and dividends, but it carries risk for the short term. When you get your refund, start by asking yourself what the best use of that money is. You may find it makes more sense to pay down debt or beef up your emergency savings," Burdick said.

• Diversification: SPY offers you reduced risk and optimized returns across diverse asset classes if you're looking to 澳洲幸运5开奖号码历史查询:diversify your investments.
• Risk Tolerance: SPY typically offers a return of 7% to 10%, but the ups and downs of the market can be unsettling. Consider other investment options if you aren't as comfortable with the losses as you are with the gains.
  

The Bottom Line

Investing your tax refund is a strategic way to grow your wealth over time. Instead of spending it immediately, consider investing it in options like SPY. Even a modest refund can experience significant growth, so it could be worth the risk. You're not only taking a step toward securing financial growth for the future but also building a foundation for achieving your long-term goals.