This tax season, the average federal tax refund that taxpayers will receive is $2,548.  That’s $2500 of money you have to choose to use it wisely.  It is not extra money that you get as a gift from the government; it is your money you’ve had to hide away all year.  Well, it’s back, and it’s yours – not to waste!

There are a few different things that would be best put to use with your extra earnings. For starters, consider your overall financial status – do you owe a lot of debt, or are you interest in making some wise investments?

If you owe debt, the best practice would be to put your money into paying off as much of your [credit card] debt as possible before considering anything else. Reducing or eliminating your credit card debt sooner than try to make money off of investments will save you the most money in the end.  

From there, if you have extra money or do not have debt to pay off, consider investing in an IRA, a 529 fund (tax-deductible college savings fund), or a CD. Currently, CD’s are averaging 5.4% interest rate, which is about double the rate of inflation.  Whether you have a Roth or a traditional IRA, you're allowed to make up to a $4,000 contribution ($5,000 if you're 50 or older) for tax year 2006 through April 17 this year. Or, if you can't make that deadline, you can make your 2007 contribution with it.

If you don’t want to make any investments at the moment and don’t have any debt to pay off, considering simply putting the money into your current emergency savings fund.  The best place to house your emergency fund is through a high-yield savings account. High-yield savings accounts work slightly different than money market accounts in that they typically don't offer check-writing capabilities, just as they don't limit your number of transactions as money market accounts can.
 
If you want to put your refund to use in more than one way, the IRS is now offering a split-refund option, which lets you designate up to three accounts at financial institutions into which you want the IRS to direct deposit portions of your refund.