A $4,000 tax refund could grow to $31,000 — if you don’t spend it

A $4,000 tax refund could grow to $31,000 in 30 years — if you deposit it into a Roth IRA and leave it untouched. That’s the difference between treating a refund as found money to spend and treating it as a rare opportunity to build long-term financial security.

Economists expect larger-than-usual tax refunds this year due to new tax rules passed by Congress. The average federal tax refund of around $3,000 may increase by $1,000 or more. But financial expert Suze Orman warns that most households are likely to spend the windfall rather than strengthen their finances.

She recommends six specific uses for an unexpectedly large refund, starting with emergency savings. A $4,000 deposit in a high-yield savings account earning 4% to 5% generates $160 to $200 in annual interest while staying accessible for unexpected expenses. That buffer becomes critical amid rising job insecurity, as companies increasingly adopt artificial intelligence to replace human roles.

Next, Orman advises attacking high-interest credit card debt — but only after securing a 0% APR balance transfer offer. Moving a $4,000 balance from a card charging 22% interest avoids approximately $880 in interest over 12 months, with every dollar paid going toward principal. The strategy requires discipline to pay off the balance before the promotional period ends.

She also recommends using part of the refund for preventive maintenance on cars or homes. A $500 roof repair now can prevent a $15,000 replacement later. Similarly, maintaining a vehicle avoids costly repairs and delays entry into today’s expensive auto market, where new cars average over $48,000 and used models cost thousands more than just a few years ago.

For long-term growth, Orman highlights the Roth IRA. The 2026 contribution limit rises to $7,500 — $8,600 for those 50 and older. A single $4,000 deposit, assuming a 7% average annual return, grows to about $31,000 over three decades. Withdrawals in retirement are tax-free.

Orman also suggests investing up to $1,000 in skills development — online courses, certifications, or community college classes — especially for workers in fields vulnerable to AI, such as customer service, data entry, and content creation. Updating qualifications can mean the difference between staying employed and facing a difficult job search.

Finally, she urges a shift in mindset: ask whether each potential use of the refund is a need or a want. “If there is any part of your financial life that gnaws at you right now, the kindest and smartest move you can make today is to limit your spending,” Orman writes. Financial peace of mind, she argues, is the greatest need a refund can fulfill.

Orman’s hope is simple: that people prove economists wrong by saving and investing their refunds instead of spending them.