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HOW TO MAKE INTERNATIONAL PAYMENTS

This tutorial is about the How to Make International Payments. We will try our best so that you understand this guide. I hope you like this blog How to Make International Payments. If your answer is yes then please do share after reading this.

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Going abroad is not easy. Neither is managing your finances in two different countries. When I moved to France in September, I realized that not every country in the world has a banking system as electronic and fast as the United States. I had to submit document after document, wait for my applications to be processed, and then wait for my card, PIN, and online banking information to arrive in the mail (all in different letters, of course). In total, it took me about five weeks to get a bank account in France.

I couldn’t skip the process either. I specifically needed a French bank account with a French IBAN (International Bank Account Number) in order to pay my bills. For example, my Metro Pass account will only accept direct debit each month from a French bank account. Also, some online retailers will only authorize transactions with payment forms issued within the EU, which means my credit cards are sometimes declined when shopping online. Depending on where you live abroad, there are services that can manage your finances in multiple currencies or for US residents living abroad. Make it easy for consumers to send money.

Main Bank Transfer Payment Networks

QUICK

SWIFT is the acronym for the Society for Worldwide Interbank Financial Telecommunication, a Brussels-based organization that has been in existence since the early 1970s. It was created to help banks more securely and quickly communicate with each other regarding processing of payments by bank transfer.

How does SWIFT work?

Today, SWIFT is a communication network of more than 10,000 financial institutions in more than 200 countries, making it the largest international payment network in the world. We insist on the word ‘communication’ because SWIFT is nothing more than a messenger between banks.

Basically, what SWIFT is doing is channeling the message containing the payment instructions from the issuing bank, that is, the payer’s bank, to the sending bank, the beneficiary’s bank. Now that job may sound simple, but you should never judge a book by its cover. Read our article on how the SWIFT network works.

KNOW

SEPA is the acronym for Single Euro Payments Area. It was created in 2008 to simplify cross-border payments in euros within Europe. In other words, a SEPA payment is similar to a national payment. The SEPA area comprises 36 countries: the 27 EU member states, the UK, Andorra, Iceland, Monaco, Switzerland, Liechtenstein, Norway, San Marino and the Vatican City State (see the full list here).

How does SEPA work?

SEPA works in the same way as SWIFT except that it is only for payments in euros within the SEPA zone. The banks have direct or indirect relationships (that is, they use a network of intermediary banks).

Payment codes by country

BIC (also known as SWIFT) for international payments

BIC stands for Bank Identification Code. It is a code assigned by SWIFT, the organization, when the bank joins the SWIFT network.

What is the difference between a BIC and SWIFT code?

Technically, this is what is happening. Actually, you will also hear SWIFT code, BIC/SWIFT code, SWIFT/BIC code or SWIFT identifier. They all refer to the same code and are required when making an international payment.

What does a SWIFT/BIC code look like?

It is a series of 8 or 11 characters (letters and numbers) that identifies a specific bank to which you are sending money. The code includes details of the country in which the bank is located, its location and the branch number. This is what a SWIFT/BIC code looks like:

IBAN code for SEPA payments

Unlike the BIC/SWIFT code, IBAN codes are not assigned by a central organization. They are issued directly by banks according to a format described in the IBAN Registry.

What is an IBAN code like?

It’s a string of up to 34 characters (letters and numbers) that identifies the country, bank, and account details you’re sending money to.

The IBAN number consists of:

  • Two-letter country identification code
  • two check digits
  • Up to 30 characters for the basic bank account number (BBAN)

At the time of writing this article, there are more than 100 countries registered with IBANs. 75 participating countries (including the 36 countries in the SEPA area) and 25 countries that have partial/experimental use of the IBAN system. However, mainly European banks use IBANs. The US and Canada are two major countries that do not use the IBAN system (but do recognize the system and process payments).

BSB for Australian payments

BSB is the acronym that stands for Bank State Branch. You must have this 6-digit code in addition to the SWIFT code when making a payment to Australia.

What does a BSB code look like?

This is what this 6-digit code means:

  • The first two digits refer to the bank or financial institution
  • The third digit refers to the state where the branch is located
  • The last three digits provide the unique address of the branch

ABA for payments in the US

ABA means many things in the US, but when it comes to payments, ABA is the acronym for the American Bankers Association. You’ve probably guessed that the ABA number (also known as a bank routing number or routing transit number – RTN) identifies the location where a bank account was opened.

What is an ABA code like?

This 9-digit code consists of:

  • 4 digits to represent the Federal Reserve’s routing code (which basically tells the Federal Reserve how to process the payment)
  • 4 digits to represent the bank identifier
  • 1 digit to represent a checksum. The checksum is a complicated mathematical expression that uses the first eight digits. If the final result does not equal the checksum, the transaction is flagged and redirected for manual processing.

CNAPS for RMB payments to China

The banking world is a big fan of acronyms. Here’s another one: CNAPS stands for China National Advance Payment System. You will need this code in addition to the SWIFT code only if you are making a payment in RMB (or CNH for the purists) to the PRC. If you make a payment in other currencies (eg USD), you will only need the SWIFT code.

What is a CNAPS code like?

CNAPS is a 12-digit code that can start with the keyword CN to indicate that the account is in China.

This is what the 12-digit code refers to:

  • The first 3 digits represent the bank code
  • The next 4 digits represent the city code
  • The next 4 digits represent the branch code
  • The last digit is the verification code.

Bank code for payments in Hong Kong

Unfortunately (or fortunately?) there are no mysterious acronyms for the Hong Kong banking code. Unlike other jurisdictions, Hong Kong does not set a format. What you will need in addition to the SWIFT code is a 3-digit bank code, a 3-digit branch code and a 6-9 digit account number.

What is a Hong Kong code like?

If it’s an HSBC account, it should look like this. The bank code is always given separately, the HSBC bank code is 004. It is also common to see HSBC 812-852456-888.

Classification code for payments in the United Kingdom

Sort is not an acronym for anything. The name of this code dates back to the last century when the 5-digit national codes (for manual processing) were replaced by the 6-digit classification codes (for automated processing). So the sort code is literally a code that helps the bank to sort payments into the correct UK account.

What does a classification code look like?

The classification code is a 6-digit code that is always written as three pairs of numbers. The first two digits identify the bank, the next four identify the branch.

Rate

When you make an international payment, these are all the fees that add up:

  • shipping rates – This is the commission that the payer’s bank would charge for making an international payment
  • Correspondent banking commissions – This is the fee that any intermediary bank would charge when the banks do not have a direct relationship (remember the example at the beginning of this article?)
  • reception fees – This is the fee the recipient’s bank would charge for receiving an international payment
  • FX Fees/Surcharge – This is the exchange fee when an international payment is made in different currencies

 

How much does it cost to make a SWIFT payment?

It is virtually impossible to estimate how much an international transfer will cost, it varies depending on the banks involved in the transaction, the currencies involved, the amount, if there are intermediary bank fees, etc. You could pay up to USD 50 to transfer money from Country A to Country B. Make sure you are using the correct SWIFT code to avoid delaying your payment and paying a returned payment fee.

When you make a SWIFT payment, there are three ways to pay international transfer fees:

  • OUR = you (as sender) pay all bank charges. Your beneficiary will receive the full amount of the payment. Normally, you are billed separately for these charges.
  • good (BENeficiary) = You pay nothing and your beneficiary pays everything. Charges will be deducted from the amount they receive.
  • SHA (SHARED) = you pay your own bank’s outgoing transfer fee, and your beneficiary pays your bank’s receiving fee AND correspondent banking fees.

How much does it cost to make a SEPA payment?

When you make a SEPA payment, it will cost you a domestic transfer fee (which usually means it’s free)

processing time

Wire transfers are generally only processed on the same business day if requested before the bank’s cut-off time. In some cases, they are processed the next business day due to the time difference. In Hong Kong, those cut-off times will vary +/- 30 minutes from bank to bank. You can see international transfer deadlines for major currencies below.

However, be careful, a bank that processes an international transfer on that business day does not mean that it will arrive in your recipient’s bank account that same day. What happens after you make the payment instruction is out of your control. Like you, we’d love to see real-time SWIFT transfers, but we’re not quite there yet.

International transfers typically take 1-5 business days to reach their final destination. But there are many factors that can delay your transfer: wrong bank details, holidays, weekends, time zones, country of destination, regulatory controls, number of intermediary banks, etc.

Final words: How to Make International Payments

I hope you understand this article How to Make International Payments, if your answer is no then you can ask anything via contact forum section related to this article. And if your answer is yes then please share this article with your family and friends.

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THE GROWING IMPORTANCE AND INFLUENCE OF FINTECH

Fintech 3.0 has revolutionised the financial world by taking banking and finance to consumers’ phones. But what does the growth of neobanks mean for the banking sector and new-age banks? Fintech is not a new concept. Fintech 1.0 saw the emergence of the transatlantic cable in 1866 and the introduction of one of the most used plastics in today’s world, the credit card, in the 1950s. It has been an ever-evolving concept since it saw the rise of the world’s first digital stock exchange and ecommerce businesses.

By the beginning of the 21st century, most banks’ internal processes were fully automated and digitised. Fintech 3.0 witnessed the creation of many online payment apps like Google Pay, and revolutionised the financial world.

The impact of fintech in our everyday lives is unavoidable. To understand the depth of its impact, one simply needs to look at how things worked in the past versus now.

Just a few years ago, you’d have to go to the bank to look at your bank account and get a statement. In order to send money across, a minimum of three days were required, which made payment processes slow. Now, you can get all the information regarding your bank account at the tip of your fingers.

Online banking has changed how things work in the banking sector. Not only that, but instant money transfers are the way to go.

Payments are done within minutes if not seconds. If you were to focus on India, you’d notice more and more shops in cities and suburbs now accepting online payments. Smartphones have become a huge contributor to the advancement of fintech.

Fintech 3.0 was fueled by the global financial crisis of 2008. It exposed some serious problems and weaknesses in financial regulation and services. Fintech stepped in with a solution and is continuing to rapidly revolutionise the banking systems across the world.

Fintech’s growing impact

One of the biggest advantages of fintech is its availability. It provides technology that can be used from anywhere in the world. It also has proven to be a more effective and cost-efficient way of banking. Not only does it cut down the need for physical banks – reducing cost, but it also reduces the possibility of error since the processes are all automated by various algorithms.

Fintech companies focus on providing unique solutions to fill the gaps of financial need at a more cost-efficient budget than traditional financial institutions.

Many fintechs have also focused on providing financial education, which helps people manage their money and finances better – helping them reduce their debts and teaching them the importance of saving and investing.

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BLOCKCHAIN TECHNOLOGY IN FINANCIAL SERVICES

Ever since Bitcoin came to the fore as a cryptocurrency providing an alternative to traditional finance, blockchain has been demonstrating its capabilities within financial services. In this article, we take a closer look at how blockchain technology is driving value for financial service organizations.

The value of DeFi

One key financial services use case for blockchain comes in the form of decentralised finance (DeFi) – global, autonomous capital markets that are powered by smart contracts that reside on the technology. Decentralised exchange platforms are allowing users to benefit from the interoperability, immutability and faster verification that traditional spheres sometimes lack.

Kapil Rathi, co-founder and CEO of Crosstower, explained: “Blockchain and its related technologies (digital assets, smart contracts, etc.) can bring significant improvements to the financial services market. By posting all transactions to a blockchain (public ledger), there can be certainty and transparency about the transactions occurring within a financial market.

“DeFi allows for the swapping of digital assets in a decentralised, non-custodial manner, thus reducing counterparty and custodial risk. Digital asset investors have traded hundreds of billions of dollars of trading volume on these blockchain-powered decentralised exchanges, highlighting their growing popularity and promise.

“Moreover, blockchain has also enabled money-market protocols to spring up, allowing users to obtain loans on their digital assets. Thanks to the blockchain, lenders can gain transparency into the health of these loans and the collateral they are backed by. There have already been tens of billions of dollars’ worth of digital asset loans originated through DeFi protocols.”

DLT and tokenisation for payments

Distributed Ledger Technology (DLT), which allows for simultaneous and immutable access across multiple locations in a network, has proved useful in reducing payment and settlement complexity. This has been especially prominent as cross-border activity rises globally.

“In an age of digital transformation, the financial services sector is actively looking to the adoption of new technologies to enhance the effectiveness of payment and settlement systems. This is particularly true for large financial institutions managing large volumes of intraday liquidity,” said Rhomaios Ram, CEO of Fnality.

“As it stands, for payments to be made, especially on a cross-border basis, banks often need to communicate with many other intermediaries along the chain to effectuate the transfer and move the balance as required. This process is slow and often risky, made more complicated by the lack of transparency and clear communication lines. The demand for faster, secure, cross-border transactions is on the rise, and emerging technology is naturally positioned to address these concerns.

“Tokenisation and adoption of blockchain and Distributed Ledger Technology (DLT) is revolutionising the world of payments, removing the frictions associated with payments and settlement. By researching and testing the advantages on offer through decentralised financial market infrastructures, banks and financial institutions are able to carry out payment transfers instantaneously and securely, at a fraction of the cost.”

Use of blockchain networks

Decentralised financial operations have benefitted greatly from networks built on public blockchain. Hosting transaction data on these networks allow for transparency and visibility from all users involved.

However, Conor Svensson, founder and CEO of Web3 Labs, believes that regulators need to bring this infrastructure further up in their agendas, for financial service bodies to drive true value.

Svensson explained: “We have seen financial institutions offer institutional cryptocurrency product to meet the demands of institutional investors. Whilst on the surface, this may not sound like a key value driver, other than providing additional revenue sources for the firms making such access possible, I believe it is a key step in facilitating mass adoption of some of the key innovations taking place on public blockchain networks such as Ethereum.

“With the innovations during the past two years in DeFi, investors are able to get yields that far surpass what is currently available in traditional bank savings accounts. The savvy users of DeFi, can see returns on crypto assets that are pegged to the US dollar achieve yields of 7%+ per annum, far exceeding what people can get in bank accounts. It is this type of innovation and infrastructure that is gradually being institutionalised, and as it does, we will start seeing new financial products and services being offered to consumers which offer them far more value than what is currently available.

“The crypto-onboarding by Fintechs was a key step towards this, however, what is also required is greater regulation to protect consumers (especially in the US), which I believe we will start to see in 2022. With this in place, we will start to see financial organisations driving more value both for themselves and their customers, providing access to DeFi in a more consumer friendly manner.”

The future of Fintech – where are we heading in 2022?

Sebastien Marchon, CEO of Rydoo, predicts what the future holds for the Fintech space over the course of 2022.

FS and Web 3.0

The concept of Web 3.0 — the decentralised web — is growing in prominence, in which blockchain technology is set to play a major role. An emerging idea for a more autonomous, intelligent internet powered by DLT and big data, among other capabilities, Web 3.0 is believed by some experts to be the transition that financial services need to successfully innovate in the coming years.

“Blockchain may be the foundation for Web 3.0 and the metaverse, but I believe that it’s also the key that will allow today’s financial institutions to continue to participate in tomorrow’s reality,” said Marten Nelson, CEO of M10 Networks.

“Yet with companies and investors scrambling to get in on the ground floor and participate in shaping this new iteration of the web, it’s worth exploring some of the unintended consequences of this mass move toward decentralisation and what role, if any, traditional financial institutions should play.

“As a customer, Web 3.0 has the potential to add a lot of friction to my life. Clearly, it would be much easier if I could earn and spend money without making multiple conversions or needing to maintain multiple wallets. I want less complexity, not more. We’re thirteen years into Bitcoin and it’s still far too complicated to use in a truly decentralised fashion.

“If financial institutions want to stay relevant in the era of Web 3.0, they must find ways to address these inefficiencies. Central bank digital currencies (CBDC) may play an important role, as could digital currencies issued by regulated financial institutions such as banks. However, for this to happen, financial regulators must come to terms with the fact that Web 3.0 is here and that if the players in our current two-tier monetary system want to continue to participate, it will require vast upgrades to today’s payment infrastructure. We must take steps to create an environment where transactions are global and where payments are expected to be instant, safe, and virtually free of charge.”

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FINTECHS ARE INCREASINGLY CHALLENGED BY BANKING REGULATIONS

As fintechs broaden their product sets and partner more closely with banks, the once-clear line where fintech ends and banking begins is increasingly muddled, raising questions about customer privacy, data security, compliance and other issues. Banks partnering with fintechs must evolve their compliance and third-party management processes to successfully manage the relationship, says Tom Grundy, senior director for U.S. advisory services at Wolters Kluwer in Minneapolis. Fintech partnerships offer many advantages, including a culture of innovation, speed to market, absence of legacy systems and technology expertise, Grundy says.

However, these otherwise positive attributes can also present significant challenges, given that new technologies and marketing strategies can generate a large amount of business very quickly.

Banks that enter into fintech partnerships on Day One need to be ready to run, and run fast, on legal,” he says. “If you enter a contract unprepared, playing catch-up may result in significant regulatory issues. Having the right project managers and compliance subject-matter resources in place internally should be part of the overall initial plan for building a successful fintech partnership.”

When considering whether to partner with fintechs to offer products or services, banks need to examine whether the relationship fits into the bank’s business strategy and whether the activity can be conducted in a compliant manner, says Greyson Tuck, a banking consultant, attorney and board member of Gerrish Smith Tuck PC in Memphis, Tennessee.

“The more banks allow third parties to access their core processing systems, the more opportunity there is for exposure to a cyber event,” Tuck says. “Banks need to be concerned with legal and technological security issues and follow appropriate policies and procedures to protect against breaches or similar cybersecurity events.”

Regulators expect banks to exert “clearly communicated governance” over the fintech partner’s management of customer relationships, Grundy says.

At a minimum, this means tracking all marketing relationships that essentially act as a fourth party to the partner bank; proactive approval of all outgoing marketing and consumer communications content; monthly reporting of key performance and risk metrics; clear agreement on processes for managing and responding to consumer complaints; and ongoing, scheduled monitoring and testing of transactions.

Regulators are also keeping an eye out for fintechs that are trying to take shortcuts, says Brian S. Korn, partner and head of financial services transactions, fintech and blockchain at Manatt, Phelps & Phillips LLP in New York. “They are watching for companies that are taking a different interpretation of rules and licensing laws than their peers. And the No. 1 driver of regulatory activity is always customer complaints.”

There has been a marked increase in the number of fintechs that are looking to acquire community bank charters, but that is not an easy path because regulators scrutinize the fintech to assure that it can run the bank in a safe, sound and compliant manner.

“A lot of fintech executives aren’t seasoned bankers, so they definitely have a steep learning curve when it comes to banking regulations,” he says. “Before applying for regulatory approval of any bank acquisition, they need to have an adequate compliance team in place.”

Regulators are particularly concerned about fintechs complying with Know Your Customer rules when establishing new accounts, Tuck says. When acquiring a bank charter to obtain deposits, fintechs will need to pay close attention to the flow of cash within the accounts—how much money is coming in and out, and what accountholders are doing with that cash.

“Fintechs’ whole espoused competitive advantage has been that they have much less red tape, so they can be more nimble to do business with,” he says. “So if they acquire a bank charter, the challenge becomes how to maintain that competitive advantage.”

Katie Kuehner-Hebert is a BAI Banking Strategies contributing writer.

Discover how fintechs are an increasingly valuable resource for banks in the BAI Executive Report, “Banks and fintechs are on the partnership track.”

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FUTURE OF FINANCE: WHAT FINTECH EVOLVERS CAN TEACH US

What do Blockbuster, Vine, and Compaq have in common? The answer lies at the heart of every business decision ever made—the need to evolve and stay relevant or cease to exist. Some years ago, one savvy business person said it best, “What’s most dangerous in business is to not evolve.” Today, that same person has a net worth of over $200 billion US dollars and has revolutionized the retail industry as we know it. So maybe he got a few things right and, yes, I’m talking about the one and only Jeff Bezos.

But what does all this have to do with the banking industry? Well, aside from 74% of surveyed banking executives believing that tech firms, such as Bezos’ creation Amazon and Google pose a significant risk to the financial industry status quo. It’s a lesson that even household names aren’t safe from the evolutionary curve. So, what can financial firms do to stay relevant and even ahead of the market? Let’s look at some of the industry’s evolvers’ strategies and best practices.

Fintech evolvers and how they are changing the industry as we know it

In 2022, over 82% of financial companies state they are planning to focus intensively on their fintech partnerships, showing an overwhelming level of confidence in technology as the future of finance. Meanwhile, 67% would go as far as to say that failure to invest in a digital future means that there won’t be a future to consider.

Yet, despite this positive sentiment, it’s essential to remember that 53% report failures in keeping up with digital expectations and missing targets, while 73% aren’t making a return on investment. The question remains—how to evolve and succeed? Let’s take a look at some of the success stories.

  • Card goes cardless. When the world’s two best-known card providers added fintech firms to their portfolios in deals that totaled in the billions, the world took notice and not just because of the sheer value. This act of confidence indicated that fintech solutions are the future, and smart investments could be the making or breaking of a company.
  • Out-of-branch and onto mobile. Without a doubt, the coronavirus pandemic accelerated the movement of bank branch closures. However, savvy companies didn’t just place their funds into web services. Instead, they looked to mobile, a format that counts over 2.3 billion users today and provides access to even more users, expanding its market influence exponentially.
  • Seamless automation. Alongside self-service checkouts, consumer demand for self-service financial products is rising too. People are seeking information and answers faster than ever before. Integrating digital tools can help automate processes and develop increased customer satisfaction, which, for example, explains the appeal of digital-only banks that often deliver services quicker than their brick-and-mortar counterparts.

What do the evolvers have that others don’t?

If we were to take a glance over the last 200-300 years of banking, we’d see a lot of similar characteristics and services that we currently see today—safekeeping of valuables, money management, loans, investments, etc. But does that mean the evolution of the banking sector has been stagnant, far from it? Conversely, in my practice, I’ve noticed that companies that display certain traits tend to be able to capitalize more on market needs and adapt to suit them.

  1. Keep it simple. Complicated solutions are just that, complicated. Instead, when it comes to fintech, the more straightforward and understandable for the end-user a solution is, the better. Take PayPal, for example. It was originally intended as just a way to transfer money. Now, it’s a firm with a value of over $216 billion.
  2. Focus on keeping it in line with the overall strategy. While the old adage is true, and you shouldn’t keep all your eggs in one basket when it comes to digital transformation, there’s a lot to be said of focusing your energy on one solution that fits neatly within your company’s objectives. Having an integrated plan cuts down on costs and ensures a consistent approach across the company.
  3. Remember, in 2022, data is king. That’s why it’s essential to integrate data analysis and to learn across your business. By understanding your market fit, and customer needs, you can better adapt your strategy to evolve to market demand. For example, by leveraging the data of borrowers, you can better adapt your business profile and offering to suit actual market needs at the moment.
  4. Impersonalized service is out. Tailored is in. From the first moment you set foot inside a branch all the way to opening the company’s app, the modern consumer expects a tailored customer-service experience that acknowledges them as an individual. Long gone are the days of stuffy suits and lines waiting to be served. The modern experience is quick, tailored, and ensures the user is treated like a human at every part of the process.
  5. Ensuring automation where possible. Fast and functional in the future. Unfortunately, this doesn’t always go hand-in-hand with a human-to-human experience. That’s why many companies are choosing to make the compromise and automate what can be automated in the most human way possible. For example, some firms choose to scan and process documents automatically to leave more time for customer service or more intensive investment management requirements.

Pearls of wisdom—what comes next?

The message—evolve or cease to exist—is clear. But what does this mean for companies in practice, and more importantly, where should they start? When it comes to digital transformation, this is an inside-out procedure, which means transformation has to start at the heart of the company. Once it’s established there, solutions can be more easily rolled out and done so effectively.

At the same time, it’s essential to remember that one should not develop for development’s sake alone. Instead, like any business decision, it should be based on actual market need. For those moving forward in the evolution process, my advice is to explore your value proposition against the backdrop of the market and explore just how it can be adapted to meet consumer demand now and in the future.

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8 GREAT WAYS TO SPEND YOUR TAX REFUND IN 2022

Making a plan for your tax refund is the best way to make sure it doesn’t slip through your fingers. It’s possible to use a tax refund to enhance your future. Whether you’re expecting your “usual” tax refund this year or have a sneaking suspicion that it will be larger than usual, it’s good to have a plan. Without a plan for using the funds, it’s easy to let the money slip through your fingers. Here, we offer eight ideas for ways to make the money work for you.

1. Shore up your emergency fund

Last summer, nearly 40% of people who had an emergency savings account said they’d dipped into those funds during the COVID-19 pandemic. And according to a YouGov survey, 73.3% spent half or more of their savings to get by.

If you’re one of the millions of Americans who could not pull money from emergency savings to cover medical expenses or repair a busted radiator, this is your chance to turn things around. Sure, it would be more fun to spend the money on a weekend getaway, but it’s possible you’ll find it more satisfying to have an emergency fund.

2. Contribute to retirement

If we live long enough, we’re all going to reach retirement age. Why not get the jump on retirement by investing your tax refund? Whether you already have a growing retirement account or have not begun to save, the benefits of compound interest cannot be overstated. For example, let’s say you’re 35 years old and receive a $3,000 tax refund this year. You put it in an investment account with an average annual return of 7%, and don’t touch it until you’re 70. This year’s $3,000 refund will be worth more than $32,000 by the time you need it, even if you never add another cent to the account.

3. Fund self-care

The last couple of years have been challenging for many, emotionally and physically. According to the Kaiser Family Foundation (KFF), about 4 in 10 U.S. adults have reported symptoms of anxiety or depression since the beginning of the pandemic. That’s up from 1 in 10 between January and June 2019. KFF also reports that 12% of Americans say their chronic health conditions have worsened since the pandemic hit U.S. shores. In addition, 36% say they’ve had difficulty sleeping; 32% have had a hard time eating; and 12% have increased their consumption of alcohol or other substances.

If you’re suffering emotionally or physically, consider using your tax refund to help. Book a doctor’s appointment, buy the medications you need, pay for a series of relaxing massages, or find another healthy way to make yourself feel better.

4. Pay off debt

There’s no denying that being overextended is a stressor. Even if your refund isn’t large enough to pay off an entire debt, why not use the funds to pay it down? Not only is paying down debt satisfying, it can help you rest easier.

5. Buy life insurance

Paying for life insurance is one of the most inexpensive ways to provide for your family. A term policy can cost pennies a day, but provide your family with the money they need to live if you should suddenly die.

7. Make repairs and improvements

Delayed maintenance issues like dry rot, peeling paint, and cracked windows can become expensive problems when left unattended. Make a list of the jobs that need tackling around your home, and use the refund money to pay for materials (and labor, if needed).

8. Start a small business

Many small businesses require very little seed money. Think about what kind of business you want to create, and read up on what it would take. Then use your refund as a down payment on your future.

In some cases, a refund means you’re having too much kept out in taxes each year. If so, you would come out ahead if you changed your deductions and invested the extra funds each month. If that’s not the situation in which you find yourself, that’s okay. You can still enhance your life by choosing where your tax refund can do the most good.

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