3 smart things to do with your tax refund in case of a recession

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• Stock volatility caused by President Donald Trump's tariff plans has sparked fear of a recession.
• Financial planners share ways to make a tax refund count.
• Keeping strong savings, paying off high-APR debts, and investing while stocks are down can all help.

President Donald Trump's frequently-changing tariff plans have introduced stock market volatility. This volatility, along with increased prices due to tariffs, have spurred fears that a recession could be around the corner.

We aren't in a recession yet. But if you're planning on getting a sizable tax refund and you want to start preparing for one, here are three things you can do to make your refund count.

1. Pay off debts with high annual percentage rates

The Federal Reserve recently chose to keep interest rates steady at the March Fed meeting. Since interest rates are high right now, that means that annual percentage rates for consumer loans are also high.

This is especially true of credit cards, which offer a variable interest rate.

"What you once thought your interest rate was for your credit card has probably drastically increased without you even knowing, because all credit cards are variable interest rates," says Rianka R. Dorsainvil, CFP® professional, founder, and senior wealth advisor at YGC Wealth.

If you have credit card debt you haven't paid yet, using the refund from your tax return to pay it off can be a great way to avoid racking up debt. But other loans with lower rates or fixed payment plans aren't as important to pay off right now.

"You want to focus on the high APR stuff," says Malik S. Lee, CFP® professional, managing principal for Felton and Peel Wealth Management.

2. Make sure your cash reserves are strong

Unemployment rates are sitting around 4% right now, although it did rise slightly in February. While that rate isn't terrible, many job markets are being hit hard by layoffs — especially if you're a federal worker.

If you have a job with the government, or you're in a role that's currently seeing a lot of layoffs, you might want to make sure your emergency fund is strong.

"Right now, cash is queen," says Dorsavinil. "We need as much cash as possible because we are in an uncertain period of time."

Both Lee and Dorsainvil say that high-yield savings accounts are a good place to put your tax refund if you're hoping to build your emergency fund. "There are still some of these high-yield savings accounts paying 4.5%. That is higher than inflation's at right now," says Lee.

Dorsainvil says you should try to maintain around three to six months of fixed living expenses in your emergency fund as a double-income household and around six to nine months if you have a single-income household.

If your tax refund is less than $5,000, the Varo Savings Account could be a good place to store it. The Varo Savings Account offers 2.50% to 5.00% APY, with the highest interest rate being reserved for balances under $5,000. This makes it one of the few remaining 5% interest savings accounts.

Since the average tax refund was around $3,000 last year and is around $3,300 this year according to a March 7 report from the IRS, it's likely your tax refund will be in a good spot to earn the highest interest rate from Varo.

If you're looking for an account to store your general emergency fund in, or if you expect to get a tax refund of more than $5,000, here's a list of some of high-yield accounts from online banks.

3. Invest in stocks while prices are off from highs

If you feel confident in your emergency fund and you don't have any high-interest debt you need to pay off, you might want to consider investing, whether through a brokerage account or other investing methods, while stock prices aren't at their highest point.

Lee says, "the S&P 500 is in the negative, and certain things are in correction territory, meaning down 10% from the highs. So, you may use this as a buying opportunity to buy some things that have pulled back from the highs."

Just keep in mind that, unlike a federally insured bank account, there's a chance you'll lose the money you invest.

"Right now, the market is in flux," says Dorsainvil. "So, if you put $10,000 in today, and tomorrow, it's $8,000, how would you feel? And if you're saying, 'I can't afford to lose that money,' then the market is not the place for your money right now."