5 Practical Ways to Use Your Tax Refund

If you’re having trouble deciding what to do with tax your refund, or simply need some inspiration, here are some ways to make it pay off in the long run.

4 min read

For many Americans, few things make tax season more rewarding than receiving a refund. However, knowing what to do with this influx of cash can sometimes be challenging, especially since many of us don’t have a set plan for it. While it might be tempting to make spur-of-the-moment decisions, using your tax refund thoughtfully can certainly pay off in the long run. Spaces help you easily set money aside right from the N26 app, allowing you to visualize and work towards your goals no matter how small or ambitious they might be. Setting your tax refund aside and putting it in a dedicated sub-account can be a great first step towards accomplishing some of your biggest financial objectives.

If you’re having trouble deciding what to do with your refund, or simply need some inspiration to help you get motivated, here are 5 practical ways you can make the most out of it.

1. Create an emergency fund

Having an emergency fund is essential when it comes to dealing with unexpected life situations. Now more than ever, it has become important to build up an safety cushion should your financial circumstances shift. Not having enough savings could put you in an uncomfortable situation in the event of job loss, a medical emergency, or a major home repair. While you ideally want to aim to have several month’s worth of living expenses stashed away, your tax refund might just be the perfect way to start or reinforce an emergency fund. Creating an “Emergency fund” goal can be a useful first step towards being better prepared should the unexpected occur.

2. Invest in your career

Whether you’re looking to take that next professional step, or have always dreamt of pursuing your dream job, investing in your career can be one of the most rewarding and fruitful uses for your tax refund. Take time to identify courses or workshops that might help you gain the skills necessary to take your career to the next level, and use your refund to start the process. If you’re not sure where to start, picture yourself in your ideal role a few years down the road, figure out what skills you’ll need to get there, and develop an action plan to take steps towards your goal. You’ll be surprised to know that some learning opportunities might already be available to you at a relatively low cost. Use your tax refund to create a “Career Development” goal, and continue to fund it and use it to grow professionally.

3. Save for something big

Saving for a down payment or a major home improvement project might seem intimidating, but getting one step closer can be as easy as putting your tax return towards these “bigger” purchases. Creating a dedicated space for these goals will help you keep this money separate from any other savings accounts you might already have, and reduce any temptation to use it towards something else. Since these larger purchases usually require some time and disciplined saving, use your tax refund to create a dedicated sub-account. A “Home down payment” goal will allow you to see your money grow as you get closer to achieving your goal, which can be rewarding in itself.

4. Pay down debt

It’s a reality that many Americans live in debt, be it from student loans, credit cards, car payments, or unexpected life events. Your tax refund could be a great opportunity to start putting money towards paying down any outstanding balances, which in turn could translate to paying less in monthly interest fees. Consider creating a dedicated goal with your tax refund, to help you track and put money aside to pay down debt. As you take money out from this account to pay down any outstanding loans, you can reduce the total goal amount to reflect your progress.

5. Pay it forward

In times of need, there are many charities and causes that can use your help. If you happen to be in a position of privilege where you’d like to give back, you can use your tax refund to donate to your favorite charity or cause. If you don’t have a particular organization in mind, there is no need to donate money immediately. You can put your refund money aside while you take your time getting informed and identifying which groups might need your help the most. Be sure to evaluate the impact that various organizations have, and keep in mind that some of the biggest names might not provide the direct relief that certain smaller nonprofits specialize in. While not all donations are tax-deductible, keep any receipts and documentation from 501(c)3 charities to itemize deductions next year.


Open an N26 account today in just 5 minutes, and receive your paycheck up to two days early when you use direct deposit¹. Use Spaces to organize your finances, and quickly and easily save for your goals in just a few taps. Plus you’ll receive instant notifications on all account activity, so you’ll be alerted the moment your refund hits your account.

¹ Faster funding claim is based on a comparison of our policy of making funds available upon receipt of payment instruction versus the typical banking practice of posting funds at settlement. Fraud prevention restrictions may delay availability of funds with or without notice. Early availability of funds requires payor’s support of direct deposit and is subject to the timing of payor’s payment instruction.

The N26 account is offered by Axos Bank®, Member FDIC. N26 Inc. is a service provider of Axos Bank. All deposit accounts of the same ownership and/or vesting held at Axos Bank are combined and insured under the same FDIC Certificate 35546. All deposit accounts through Axos Bank brands are not separately insured by the FDIC from other deposit accounts held with the same ownership and/or vesting at Axos Bank. The N26 Visa® Debit Card is issued by Axos Bank pursuant to a license by Visa U.S.A. Inc. The N26 Visa Debit Card may be used everywhere Visa debit cards are accepted.

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