Start a conversation about how people spend their tax refunds and someone will inevitably chime in with a comment about how getting a refund suggests you’ve failed to plan properly. Refunds mean you’ve overpaid your taxes and thus lent money interest-free to the government.

Still, the results of an informal survey of readers I conducted online suggests tax refunds perform a useful purpose in providing people with a lump sum of money every spring. The majority of people who responded to the survey said they would invest their refund in their RRSP or TFSA, which is not surprising. People who fill out surveys like this are often personal-finance keeners.

The next most popular use of tax refunds was to pay down debt – mostly lines of credit, but also credit cards, student loans and car loans. As I noted in a recent column, rising rates are closing in on people with big balances on their credit lines. If the only way people can chip away at their credit lines and other debts is through a tax refund, then that refund serves an important purpose.

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Curtis Davis, a senior tax consultant at Manulife Financial, has written an analysis of the benefits of having your employer adjust your taxes lower so you receive more pay through the year, but no tax refund. If you’re sold on this, Mr. Davis has helpfully provided a description of the tax forms you’ll need to complete to change your taxes deducted at source.

Canada Revenue Agency reports that 59 per cent of tax returns generated a refund last year for an average amount of $1,735. Several people indicated in the online survey I did that they’re using their tax refunds for vacations and other fun stuff. Ideally, you’d use only a bit of your refund for discretionary spending. Paying down debt or investing is a better way to use money you lent the government interest-free.

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Rob’s personal finance reading list

Women’s pay and the 10-year baby window

A U.S. study finds that women’s pay never recovers to levels comparable to their spouses if they have a first child between the age of 25 and 35. Woman who have their first child before 25 or after 35 eventually close the pay gap.

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Who has the best coffee rewards?

A thorough comparison of the customer loyalty programs offered by Starbucks, McDonald’s and Tim Horton’s. Must reading if you’re a regular at any of these chains.

Investing is not about winning

I couldn’t agree more with this article about how to talk to people about money and investing. Stop assuming everyone wants to maximize returns and start recognizing that people have different goals and attitudes. Sometimes, sleeping at night is better than trying to hit a home run.

Planning for a low-income in retirement

John Stapleton, an expert on retirement planning for people with low incomes, has produced a guide with all the latest numbers on the Guaranteed Income Supplement and Old Age Security.

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Today’s featured financial tool

Check out Sparx Trading for monthly listings of deals and promotions offered by online brokerage firms.

Ask Rob

Q: “Last year, I opened a registered education savings plan for my twin grandkids, contributing for 2016 and 2017. My intention was to choose an exchange-traded fund, but was unable to decide on any. Anyhow, with a 2018 contribution of $5,000, would you advise if an ETF is still a good option, and which ETFs you would recommend?”

A: “ETFs are a solid portfolio building block for a huge range of purposes, including RESPs. However, I would only consider ETFs if your grandchildren are five years or more away from graduation. For young kids, ETFs offer the opportunity to benefit from long-term appreciation in stocks and bonds. If you buy ETFs a few years before an RESP beneficiary graduates and starts college or university, it’s possible that stock market fluctuations could reduce the value of the plan by a lot. If you do use ETFs, gradually start moving the money into a safe harbours such as GICs and cash as your grandkids enter grades 10 through 12. Check out my ETF Buyers’ Guide for ideas on what funds to buy in four key categories for portfolio-building:

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length.

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Featured Video

Is a home-equity line of credit right for you? This video from the federal Financial Consumers Agency of Canada can help you decide.

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