If you are among the lucky taxpayers to receive a refund this year, you might be wondering what to do with that unexpected money. Why not invest that extra cash in your most prized possession—your toddler?
1. Invest in Her Mind
One way to invest your tax refund is to invest in your toddler’s mind. Take the opportunity to buy books to stock up on your toddler’s reading library. After all, “It’s never too soon to start reading to your children,” according to the National Education Association (NEA). “If your child learns early to associate reading with pleasure, she is more likely to enjoy reading on her own when she is older.” And it’s a great way to bond with your child, too.
The NEA suggests books that are about things that interest your toddler, like cars, insects, animals, etc. They also recommend giving your child a chance to help choose her own books.
2. Invest in His Physical Activity
Everyone knows that childhood obesity is an American epidemic. So why not do something to avoid it from the start? Take your refund and buy playground equipment for the backyard. There’s an endless variety. Home improvement stores offer several choices of do-it-yourself play equipment, with options like swings, slides, and rock-climbing walls. There’s also the traditional metal-framed swing sets.
And don’t forget safety features when planning your tot’s fitness haven. The Consumer Product Safety Commission (CPSC) recommends at least 9 inches of mulch, wood chips, or shredded rubber under play equipment and spread out to 6 feet in all directions.
Another investment option is an inflatable bouncer for optimum physical activity. These are large, inflatable gyms made of puncture-resistant fabric with protective walls and sometimes a slide. Amy and Troy Doverspike of Erie, Pennsylvania, bought one for their toddler son, and it provides a fun, safe energy release, both in their basement during cold, snowy months, and outdoors in warmer weather.
Some larger items you might want to avoid for toddlers are trampolines or pools. The CPSC advises against trampolines for kids under the age of 6. And the organization says backyard pools, especially the large inflatable ones, are particularly dangerous for toddlers, who are often attracted to water.
For the family with a smaller return or one simply looking for another option, take your tax refund and sign your tot up for swimming lessons, mom and me gymnastics, or some other kind of class that emphasizes physical movement.
3. Invest in Her Future
Another way to invest in your toddler is to invest your tax refund in some type of college or savings account. It may not be as fun as a swing set, but when your toddler is college age, she’ll definitely appreciate it—and so will you.
Most finance professionals suggest a college 529 savings account as the way to go. “A 529 Plan is a vehicle that allows you to save for your child’s future education costs,” says Natasha Verbsky, a financial advisor with AXA Advisors, based in Dallas, Texas. “It can be used for tuition, room and board, required books, and fees associated with undergraduate school, graduate school, and technical training.
“One of the benefits of using a 529 plan to save for your toddler’s education, versus putting the money into a regular savings or brokerage account for your child, is that the 529 plan will grow tax-deferred,” Verbsky says. “In addition, all withdrawals used for qualified education expenses will be distributed tax free. These tax advantages can have a huge impact on the value of the account over time.”
“Definitely open or contribute to a 529 savings account,” says Galia Gichon, a personal finance expert and mom of two small children from New York. “You could easily contribute as little as $25 (many plans have a low minimum contribution) and know that you are saving them money and stress by not having to take out future student loans.”
Looking for an option not tied to education? “If they are old enough to understand household brands (such as Kellogg or GE), you could buy a few shares of a stock in their name … and explain to them you bought part of that company,” Gichon says.
Before you invest any of your refund, however, Verbsky says to have your regular living expenses taken care of. You can do this by making sure you have adequate disability income and life insurance policies on you and your spouse. Also, “consider building an emergency reserve fund that would cover three to six months of your basic expenses,” for emergency use only, such as the loss of a job, or unexpected expenses, she says. Finally, “If you have debt, consider paying it off or reducing it,” Verbsky says. “Not only will this allow your debt to stop accumulating due to interest rates, the extra cash flow you will have (from not making monthly debt payments), can then be used toward other items that will benefit your toddler.”
4. Invest in His Sense of Adventure
Whether your refund is big or small, you can take advantage of several ways to expand your toddler’s horizons. Take your toddler on vacation to someplace new and unusual, or back to your favorite family getaway.
You can also buy a family membership to your nearest zoo, aquarium, or museum. Family memberships usually involve paying one fee, which then allows all immediate members of your family regular admission to the zoo, aquarium, or museum all year. Most memberships include discounts on food and merchandise within the facility, guest passes for grandparents or friends, and even reciprocity with other zoos, aquariums, and museums throughout the United States, allowing your family entrance into other zoos, aquariums, and museums for free or at reduced rates.
Overall, family memberships are a great investment for parents looking to get their children out and about. And it makes those unpredictable outings with toddlers more relaxed, knowing that if your child falls asleep in the stroller or throws a horrible tantrum only 30 minutes after you arrive, you won’t have wasted a full day’s admission price.
5. Invest in Her Home
Investing in your toddler’s home may not be the first idea that comes to mind, but it’s one that will have benefits that last far after the toddler years—for your child and your whole family.
Now would be a great time to take that tax refund and turn her baby nursery into a big-girl room. Or finish off that basement for the ultimate playroom.
You can also look to the future and to your whole family’s benefit by upgrading to a high-efficiency furnace, new windows, or even solar panels to make your home more energy-efficient and give your toddler a safe, comfortable place to live in now and a clean environment to live in later. “Energy-efficient choices can save families about a third on their energy bill with similar savings of greenhouse gas emissions…,” according to Energy Star, a joint program of the US Environmental Protection Agency and the US Department of Energy.
However you decide to invest your refund, if you put it toward something that benefits your toddler, it will be money well spent.