Sometime in the next few months, you'll be filing your taxes. And when that happens, you'll run into one of life's great questions: Will I have to pay, or will I get a refund? If you owe more taxes, you don't have much choice about what to do, but if you receive a refund, you'll have some saving and investment opportunities that are worth considering.

Of course, what you do with your refund will depend, to a great extent, on how big it is. In 2007, the average refund was about $2,260, according to the Internal Revenue Service. While there's obviously no guarantee that your refund would be this size, let's see what you could do with this money: 

• Contribute to a retirement account. If you invested your $2,260 in a tax-deferred vehicle, such as a traditional IRA, and you earned a hypothetical seven percent average annual return over 30 years, your money would grow to more than $17,000. (This does not include commissions, fee expenses or charges which would negatively impact the overall performance.) And that figure assumes you never put another penny into the IRA; if you invested in it regularly, you could potentially earn much more by the end of the 30-year period. You'd still have to pay taxes on the earnings, but by the time you retire, you could be in a lower tax bracket, and even if you weren't, you may be able to take withdrawals in a way that would allow you to spread out the tax burden over many years.
• Pay off some debts. If you could use the $2,260 to pay off some credit card debt, or possibly pay off a car loan, you'd free up some cash to invest. Look at it his way: Every dollar you spend on debt helps pay for your past, but every dollar you invest goes toward your future - and that's the time of your life you should focus on.
• Save for college. College costs continue to rise every year. To help pay for your children's college education, you'll need to start saving early. Fortunately, you have some attractive college-savings vehicles, such as a Section 529 savings plan and a Coverdell Education Savings Account, both of which allow money to grow tax deferred and proceeds to be withdrawn tax free for qualified higher education expenses. Your $2,260 would be more than enough to fund a Coverdell account for one year - the annual limit is $2,000 - or give you a good start on a Section 529 plan, which offers much higher contribution ceilings. (Keep in mind, though, that a Section 529 plan's proceeds might count as income to your child, thus affecting his or her ability to receive financial aid.)
• Create a cash cushion. It's a very good idea to maintain an emergency fund containing six to 12 months' worth of living expenses. Once you've established this fund, you can avoid dipping into your investments to pay for the unexpected, such as a costly car repair, a doctor's bill or a new appliance. Make sure to keep your fund separate from your everyday savings or checking accounts.

As you can see, your tax refund can help you make progress toward a number of financial goals. So, when the check arrives from Uncle Sam, put it to work. You may be pleased by the results.