How to Keep Your Tax Refund

Making a bank deposit is one way to keep your refund.
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Getting a tax refund is like getting a little (or hopefully big) gift every year. But, though it may be tempting to spend the seeming windfall -- on a vacation, new clothes or gadgets -- it can prove prudent to hang on to that refund, with the goal of growing the amount. Options as to how and where to keep it abound.

Step 1

Put it in an IRA. For working adults, retirement savings should be a priority. Even if you are contributing the maximum to your 401(k) at work, you may, depending on your income, be able to open a traditional or Roth IRA and contribute some or all of your refund. You may even be able to deposit your refund directly to your IRA. As of 2012, the IRA yearly contribution limit per individual is $5,000, or $6,000 for those who are 50 or older.

Step 2

Invest it in stocks, bonds or mutual funds. Even if the stock market is in a slump, history shows that it eventually heads in a positive direction. You can choose blue-chip stocks for stability, or start-up, high-tech stocks if you're more comfortable with risk. Via mutual funds and exchange-traded funds, you can invest in precious metals, real estate, timberland and foreign currency. Monitor the progress of your investments regularly.

Step 3

Put it in a CD or money-market account. As of 2012, these types of accounts offer fairly low returns. But the risk level is low as well. A money-market account can even be the vehicle for your emergency savings, which should comprise at least 6 months of living expenses in case of illness or job loss.

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