Ask Money

What to do with a windfall?

Chris Farrell Jan 31, 2011

Question: My Father in law generously has gifted both my children $12,000 each. They are 23 and 25, not married, and no children. What would you suggest they do with this money?

They both have college loan debt and one of them owes $7,000 in an auto loan. (Thankfully, neither of them has any credit card debt.) I would like them to save it and put it towards a down payment on a house when that time comes. What do you suggest?? Thanks. Ann, White River Junction, VT

Answer: When I was a teenager my parents would put me on a long bus ride from Washington D.C. to White River Junction. I went to a nearby summer camp for a couple of years (including counselor-in-training and camp counselor). I would usually come back to a different home. I loved Vermont.

Anyway, you didn’t write in for me to wax nostalgic about summers on a lake. My main reaction to your question is for you to put your children and father-in-law together, hopefully in person but at least over the phone.

Your adult children should solicit his ideas? What would he recommend they do with the money? Tap into his insights. They may decide to go a different path than he suggests, but it’s a thoughtful way to come up with an answer for what to do with the windfall.

A down payment on a home is a good idea.Here’s another option: Stash the money into a safe place for savings (with the one child eliminating the $7,000 auto loan).

I’m an optimist on the economy’s direction. I think much of the doom and gloom about financial prospects for our children will lift over the next few years as a statistical expansion in gross domestic product turns into a job-creating upturn in the business cycle. What I don’t think will change is job insecurity. It’s inherent in the economy. Private sector companies will continue to lay off workers whenever profit margins shrink. The same goes for non-profits. And now it looks like government workers and teachers will be more at brisk to a job loss than before. That’s why my thought is to take advantage of the cash cushion to build up savings for the proverbial rainy day.

They could also put it toward the student loan debt. However, unless that debt burden is onerous I think some of the other options are a better use of the money.

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