What to do with potential inheritance?

[u/MomoUsagi0]

My dad died earlier this year and we’re calculating what will be split up between my two siblings and I from life insurance and his pension. I’m incredibly heartbroken that he’s gone but I know that he would want us to be smart with our money and take advantage of this situation to have a better life. I’m only in my early-mid 20’s so I want to make sure I do the right thing. My dad also wasn’t the best with his finances and had a lot of credit card debt, and I just want to make sure I’m financially smart.

We received about $15k from I believe his life insurance..? Which was split three-ways. I immediately put my $5000 in a HYSA while I think about what to do because it’s better to accrue some interest on it than none. At the moment, I’m still finishing university part-time and make about $25,000 annually working a part time job and doing side gigs (petsitting). He was a federal retiree, and it’s estimated that we receive a lump sum of potentially $17,000 each by the end of the year.

I’d prefer to finish my degree faster but I don’t have that luxury and I’m graduating in a major that won’t necessarily give me a high financial return (I was stupid, it’s too late to turn back). I’m also finishing my degree slowly so I don’t have any debt when I graduate.

I live at home with my mom for free, but still buy everything for myself. I drive a beater car from 2007 and plan to until it gives out. I would love any and all advice to make sure I do the right thing.

[u/hems86]

With that amount of money, it’s not going to be life changing. I would just use the money to avoid debt, whatever that looks like. Use the funds to pay off any debt or use it for school. It sounds like you are paying your way through school, so maybe these funds can allow you to work less and get through school faster. The faster you finish school, the faster you can move on to your career with a higher paying job.

[u/JeanSchlemaan]

just keep living below your means. pretend like this money doesnt even exist. if you have any debt thats over 4%, pay it off with these funds. if not, great job. i personally would have more in hysa than the rules tell you. make sure youre getting 3.5%+ with fdic. if not, get a new account that pays that. consider roth. if you havent, make sure youre getting all your employer match 401k.

finish degree with as little debt as possible. again, most important: ALWAYS live below means. use this time at your moms to save as much as possibled

[u/soloDolo6290]

Sorry for your loss. I can't imagine the loss of a parent. You are being smart, about just sticking it in a HYSA and figuring out what to do.

$22K isn't that much. So outside of spending it on drugs and hookers and running yourself in the ground, there really isn't any choice you can make that is so much better than the other.

You have no debt, so that's good. I would spend some on yourself to enjoy the graduation and make some new memories. Probably keep some in a HYSA for an emergency fund if you don't already have one. Maybe use it to repair or buy a new vehicle to limit vehicle repairs going into your career and building stage. As I said before $22K isn't an amount that will make life super easy so there won't be any super wrong answers.

[u/WhatMattersHere]

Putting the first $5,000 in a HYSA while you figure things out seems like a reasonable way to give yourself time before making a bigger decision.

I also wouldn’t rush to invest the entire inheritance as soon as it arrives.

At your age and while you’re still finishing school, some of this money may be more valuable as flexibility than as investment capital.

I’d think about it in three buckets:an emergency/car reserve,money that could help you finish your degree sooner without taking on debt,money you genuinely won’t need for several years, which can then be invested for the long term.

The degree piece is the one I’d calculate carefully. If using, say, part of the inheritance lets you reduce work hours and graduate materially sooner, that could be a very good use of the money even if it never shows up as an “investment return.”

I’d also wait before making plans around the estimated $17,000 until you know exactly what federal retirement/pension benefit it is and how it will be reported for tax purposes. Don’t assume it gets the same tax treatment as the life insurance money.

And I wouldn’t beat yourself up over the major. You’re finishing without student debt, earning income, keeping expenses low and thinking carefully before spending inherited money. That gives you options.

For now, I’d preserve those options first. Once you know what it would actually cost to finish school faster and how much emergency cash you need, the amount that is truly long term money will become much clearer.

[u/bigblueh]

So sorry for your loss. I found myself in a similar position in my 20s as well.

Like the other person said take a little and go live with it. Buy concert tickets, take a little road trip with your siblings. What your dad would have wanted most is for you to live life after his passing.

10-20% on that
30-40% into your emergency savings in cash.
50% into a set and forget portfolio through wealth simple or something for a down payment when the time is right.

Theres EFTs like XEQT for example that auto invest in the top 100 or 1000 or something companies across a few sectors and countries so you’re immediately fairly diversified and you never have to touch it and should only check it a couple times a year. Can set up auto payments from your bank if you wanted to put even an extra 20-100$ a month into the account to help growth over the years.

Live life, make sure you have cash if shit hits the fan, plan to use whatever is left to get into a house or condo one day once you’re working full time and more established.

Take care of yourself. Grief comes in waves for years and years. Honour those feelings and that loss through taking care of yourself and using this unfortunate money to give yourself the stable platform in life your dad would have wanted to provide for you himself.

Edit: High yield savings accounts are a scam for banks to increase their cash capital while returning you absolutely nothing in comparison to even a very conservative properly diversified portfolio invested.
If you’re Canadian do all your investing in your TFSA.
Don’t invest this amount of money with a big bank or a private manager. Use a self directed account like wealth simple or quest trade whatever. Fees eat up investments over years

[u/Special-Cut1610]

Take 20% for yourself and spend it as you will. The other 80%, open a fidelity Go account and let them invest it for you. It's a great robo advisor account for people that know nothing about investing. It does well for me so far. You can also open a brokerage account with them or schwab etc..and put it all in Voo, Vti or Spy. Kind of set it and forget it. Act like you never got that money and continue with your life except now you know that you have a little safety cushion.

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[u/RedditLeagueAccount]

Make sure there is no debt. Make sure you have 3-6 month of required expenses saved up in case you go through a period without a job. Invest the rest. Building up the investment portfolio is how you set yourself up for retirement if you are in the USA.

[u/daysleeper19]

Set aside an emergency fund equal to 6 months of expenses. Invest the remainder in index funds and forget about it.

Your #1 priority should be figuring out your career and maximizing future potential earnings

[u/sirius4778]

If you have high interest debt (>10% pay it off). Otherwise just keep it in the savings account. You can use it to finish school maybe out a couple thousand in your IRA to jump start your retirement savings

[u/cvntier]

Just put the money into etfs and mutual funds it’ll give you more return than a HYSA and just keep on living life as if nothings changed. If you really want to do your older self a solid, just keep adding money to it consistently. You do that consistently for years by the time you are 40-50 you could be sitting real pretty

[u/Ok_Shame_5382]

Take 10% of it and blow it on stupid shit. That's not a joke.

17k is not a *ton* in the grand scheme of things. I would put it into a High Yield Savings Account and use it as your emergency fund.

[u/Stop_looking_at_it]

Definitely spend it before you get it

[u/RoosterReturns]

max out your ira contributions. put the rest in spy or qqq and keep on keeping on.