Preserving the value of an inheritance

Question: Hello! I have always loved listening to your Saturday afternoon show and dreamed of having enough money to wonder what to do with it. I was saddled with problems in my 20s but got back on track 2 years ago and got very good at living poor. I had $50,000 in school loans (I was graduating with my second degree in nursing and my employer was funding this) and only $2,000 in credit card debt. I also managed to save $6,000 in case of emergency. And then I found out a family member had passed and I was receiving an inheritance. First, I got a check for $80,000 (which I used to pay off the above balances) and then another check for $40,000. There'll be another one for another $80,000. Having made minimum wage for 5 years, I have no clue how to invest, and my soon-to-be fiance insists this is my money and I should do with it what I want. I may want to use some of it for helping pay off a mortgage or a wedding, but what do I do with the rest of it? Right now, it is sitting in a money market account. Melissa, Ewing, NJ 

Answer: Thanks for listening, and I hope we can help. For now, I would keep the money safe. You worked hard before you got the inheritance to get your finances in order -- and you did it. At this point, I wouldn't do anything hasty with the money or feel any pressure to invest it. 

Instead, I would park it in a safe place that preserves the value of the inheritance. 

The reason for my caution is that the answer about how to invest the money will come from thinking about what you want to be doing in coming years. What are your goals and your desires -- your vision of good life? You then match the money to those passions.  

Just to make up an example, you might decide the money is your personal safety valve and stress reliever. You know how to live frugally. You proved that over the past couple of years. The savings gives you a large cushion during harsh times -- a bad economy and high unemployment. Alternatively, you may decide that you already have the spending basics covered. You want some of the money to be invested more aggressively to meet some future aspirations. There are many more possibilities than these two examples. 

Put it this way: It's all about you and what you want. "If you can discover what you want out of life -- the why -- then there are a number of ways to get there -- the how," says Ross Levin, a certified financial planner and head of Accredited Investors Inc. The inheritance is part of your "how."

I would take your time. There's no rush. In the meantime, preserve the value of the principal.

About the author

Chris Farrell is the economics editor of Marketplace Money.


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