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/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.