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Making Your Money Last

Smart Places to Park Your Refund

You can earn 5% or more with these low-minimum, low-risk accounts.

Dreaming about how to spend your tax refund? Maybe this is the year to wake up and save some of it instead. If you haven't filed yet, you can still take advantage of the new split-refund option and request that your money be deposited electronically into as many as three separate accounts. But even if you're waiting for a check in the mail, you can squirrel away at least some of your windfall for the future.

With the average refund more than $2,000, you could be halfway to maxing out your IRA contribution for 2007. (If you are 50 or older, you can put an extra $1,000 into an IRA this year.) Or you could direct some or all of your refund to a 529 college-savings plan. Or you might just want to stash some cash in a low-minimum, high-yield savings account (many are paying more than 5% interest). That's money you could use to boost your emergency fund, pay off high-interest-rate credit-card debt -- or save for a small splurge.

Money-market funds. Deposits in taxable money-market mutual funds are not federally insured, but the funds maintain a $1 share price, so your principal is guaranteed to remain intact. For example, anyone can open an account in AARP Money Market fund (800-958-6457; www.aarpfunds.com) with as little as $100. The fund was recently yielding 5.14%, and you may write an unlimited number of checks as long as they're for at least $250. With TIAA-CREF Money Market (800-223-1200; www.tiaa-cref.org), yielding 5.09%, you may write only 24 checks a year and you might have to add to your refund check to meet the $2,500 minimum. At 5.08%, Transamerica Premier Cash Reserve (800-892-7587; www.transamericafunds.com) was yielding a smidgen less than the other funds. The minimum deposit is $1,000, and you may write as many checks as you like. Tax-free funds, which invest in municipal bonds, don't make sense now unless you are in the highest tax bracket or live in a high-tax state.

Bank money-market deposit accounts, particularly those offered by online banks, offer competitive rates these days, and your account is insured up to $100,000 by the Federal Deposit Insurance Corp. You could recently earn a 5.31% yield at UFBDirect.com or 5.30% at iGOBanking.com, with no minimum deposit. OneUnitedBank.com offers a yield of 5.30%, with a $1,000 minimum. With all three, you may make six preauthorized withdrawals a month.

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Savings accounts. All bank savings accounts are insured up to $100,000 by the FDIC. HSBCDirect.com is offering a hefty 6% until April 30, after which your account will earn 5.05%. You can link your account to a checking account at any bank or use your HSBC ATM card. E*Trade.com and EmigrantDirect.com also offer no-minimum accounts that pay 5.05%. If you're willing to sacrifice a little return for ease of setup, a no-minimum Orange savings account from ING Direct yields 4.50%.

Online banks are also wooing depositors with generous yields on FDIC-insured certificates of deposit. For example, UmbrellaBank.com was recently offering a six-month CD with a 5.40% yield. Ascencia Bank was offering both six-month and one-year CDs yielding 5.40%. NetBank.com was offering six-month CDs at 5.40%, one-year CDs at 5.45% and five-year CDs at 5.40%.

Get smart. Although you may look forward to receiving a chunk of cash each spring, think again. You're giving Uncle Sam an interest-free loan. Wouldn't you rather get bigger paychecks all year long? You can. Just file a new W-4 form with your employer. To recompute the amount you send the government, use our calculator at kiplinger.com/tools/withholding.