7 Smart Things to Do With Your Tax Refund If You’re Under 25

OVERVIEW

Saving money as a young adult in an everchanging financial world can feel insanely impossible. Between sky high rent, expensive groceries, tuition, and (of course) going out, there's rarely much left to spare. That's what makes your tax refund, most likely your largest paycheque of the year, such a big deal.

So once that refund is deposited into your account, what should you actually do with it? Here are seven smart, realistic ways to use your tax refund to support and set up both your future and your present.

1. Start an emergency fund (future-you will thank you)

Unexpected expenses happen fast: your laptop stops working, your car breaks down, or you suddenly find yourself without work. Without savings, those moments usually end up on a credit card.

An emergency fund helps cover essential expenses when life throws a surprise your way. You can just have a separate high-interest account, or even put the money in your TFSA (just ensure that the money is easily accessible when you need it). A common rule of thumb is to aim for a few months of essential living costs, but that can take time to build. Using part of your tax refund to start an emergency fund, or add to one you already have, is a strong first step.

Even setting aside a smaller amount can help create a financial buffer today, and you can continue adding to it gradually over time as your budget allows.

2. Put it into savings (and make it hard to touch)

Saving money is easier when it's not constantly tempting you. Depositing your refund into a savings account, especially one you don't check daily, helps keep the money available for future needs instead of impulse spending.

An average refund of $4,822 is roughly equivalent to four months of groceries or six to seven Costco runs. Having that cushion can make everyday expenses feel far more manageable.

3. Pay down high-interest debt

If you're carrying debt with high interest, using your refund to pay it down can be one of the smartest financial moves you make. This can include credit cards, personal loans, or other balances that charge more interest than your money would earn sitting in a savings account.

A good rule of thumb is to focus on the highest-interest debt first, since that's what costs you the most over time. Lowering these balances can reduce how much you pay in interest, free up cash in your monthly budget, and give you more financial breathing room going forward.

4. Open or contribute to a TFSA

If you're eligible for a Tax-Free Savings Account (TFSA), your tax refund can be a great way to get started. A TFSA allows your investments to grow tax-free, and you can withdraw funds tax-free when you need them.

Putting even part of your refund into a TFSA can help you build long-term savings while still keeping your money accessible. It's one of the most flexible investing tools available for young adults.

5. Open or contribute to a FHSA

TFSAs aren't the only tax-smart way to invest. If buying your first home is even a “someday” goal, a First Home Savings Account (FHSA) is another powerful option to consider. This lets you contribute money and claim a tax deduction now, while your savings grow and withdrawals are tax-free for a qualifying home purchase.

Using your tax refund to open or add to an FHSA can help you start building a down payment sooner, even if homeownership still feels far off. You don't need to go all in—starting small still gives your money time to grow and puts future-you in a better spot. And even if you don't end up using it, it can be transferred to your RRSP for retirement.

6. Invest for the long term

If you don't need your refund right away, investing it could help it grow over time. While the TSE 300 can fluctuate in the short term, it has historically provided stronger returns than leaving money in a low-interest account.

You don't need to be an expert to get started. Many people choose diversified investments like index funds or ETFs and let time (and the mighty power of compounding) do the work.

7. Use it to support your lifestyle (intentionally)

Not every dollar has to go toward saving or investing. Your refund can also help you enjoy experiences that matter to you, without the guilt.

An average refund of $4,822 could cover:

• VIP concert or festival tickets
• A ski trip to Banff or Whistler
• Your dream vacation; Euro summer or Asia trip

Spending intentionally, rather than impulsively, helps you enjoy your money while staying financially balanced.

8. Invest in skills & career growth

Your earning potential is one of your most valuable assets, especially in your early twenties. Using part of your tax refund to build new skills can pay off long after the money is spent.

That might mean enrolling in a course, earning a certification, attending a conference, or investing in professional development that helps you stand out. Even smaller steps, like upgrading software, buying tools you need for your field, or improving your portfolio, can make a difference.

Some tuition paid to approved post-secondary institutions over $100 may also qualify for the Tuition Tax Credit, which can help reduce your taxes. Building your skills today can open doors to higher income and more opportunities down the road.

9. Start or grow a side business

If you've been thinking about launching a side hustle, your tax refund can give you a practical starting point. Whether it's freelance work, selling products, tutoring, or creating content, that extra cash can help cover early expenses like inventory, marketing, website costs, or software tools.

Owning a business can increase your income over time, and it may also come with certain tax advantages depending on your situation. Starting small allows you to test your idea without taking on unnecessary risk, while giving you the chance to build something that grows alongside your career.

10. Split it up: save some, spend some

You don't have to choose between being responsible and having fun. Many people under 25 use their refund by dividing it across a few priorities: some for savings, some for investing, and some for experiences.

That balance can help you build good financial habits early, while still enjoying the present.

Final Thoughts

Being under 25 often means feeling like you're still figuring everything out at once, career, money, independence, and what “stability” even looks like. A tax refund may not solve everything, but that extra bit of cash can offer something rare at this stage: choice.

Whether you use it to build a safety net, start investing for the future, or give yourself room to breathe through meaningful experiences, what matters most is being intentional. Small decisions made early tend to echo forward, quietly shaping the future you desire and fully deserve.

Filing your taxes doesn't have to be complicated or time-consuming. With TurboTax, many people can file in under 50 minutes, with support available at every step, whether you prefer expert help or to file on your own with guidance along the way. Wherever you are right now, taking this one step can help you move forward with more clarity and confidence.

Disclaimer

This article is intended to provide general financial information and does not constitute personalized tax, investment, legal, or other professional advice.