Are Canadians sleeping on their tax refunds?

New poll shows only 12 per cent of Canadian tax refunds are being invested; many choose to
park refunds in cash for a rainy day

TORONTO, April 26, 2024 /CNW/ - A new poll from Investor's Edge reveals that only one in ten (12 per cent) Canadians plan to invest their tax refund this year, as other financial demands are putting pressure on family finances and many Canadians choose to simply hold cash given economic uncertainty.

Where are Canadian tax refunds going?

• Holding as cash (39 per cent, up from 35 per cent last year)
• Paying down debt (24 per cent, up from 21 per cent last year)
• Spending on essentials (29 per cent, down from 32 per cent last year)
• Discretionary spending (12 per cent, down from 17 per cent last year)
• Investing (12 per cent, down from 14 per cent last year)

"There are more demands on money these days, but Canadians getting a lump sum this spring should consider the opportunity to put those funds to work for them as part of a broader investment plan?particularly given that higher inflation means the value of parked cash erodes more quickly," said Luka Marjanovic, Managing Director and Head, CIBC Investor's Edge. "While many Canadians are planning to hold on to their refund as cash, it may not be a good long term strategy. Self-directed investing is a low-cost option for putting the cash to work in a way that can earn more over time."

More than two-thirds (68 per cent) of Canadians claim to have received or expect to receive a tax refund, suggesting that many have or feel as though they have overpaid over the course of the year.

"While receiving a tax refund may feel like a bonus, it has also been likened to giving the government an interest-free loan from each of your paycheques?money that could have been fueling your investments and earning interest in previous months," added Marjanovic. "Each investor's tax planning should involve minimizing refunds to make best use of assets throughout the tax year, in addition to deploying any end-of-year refunds."

For those Canadians looking to invest some of their tax refund this season a few considerations from Investor's Edge include:

• Leveraging tax-advantaged accounts like TFSAs, RRSPs, RESPs and FHSAs to manage the tax implications of future earnings
• Comparing rates of return and weighing the opportunity costs and risks of investing vs. holding cash or paying off debt
• Learning how to diversify and build a resilient portfolio
• Reviewing strategies to reduce your taxes for the year ahead including updating TD1 and T1213 forms for 2024 to reduce the amount of tax withheld during the year

To learn more about investing please visit www.investorsedge.cibc.com.

About CIBC Investor's Edge

CIBC Investor's Edge is a leader in self-directed investing. Investor's Edge provides an intuitive mobile trading platform, easy to use tools, extensive research, and a growing library of educational materials to help investors chart their own course. Backed by one of Canada's largest banks and the forerunner in Canadian equity trading with CIBC Capital Markets, Investor's Edge helps clients bring clients' ambitions to life.

About the study

These are some of the findings of an Ipsos poll conducted between April 3 to 4, 2024 on behalf of CIBC Investor's Edge. For this survey, a sample of 1,001 Canadians aged 18+ were interviewed online. Weighting was employed to balance demographics to ensure that the sample's composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±3.8 percentage points, 19 times out of 20, had all Canadians aged 18+ been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.

SOURCE CIBC