<p>A very dear friend of ours died recently and left my 22 year old daughter a percentage of her estate. It will of course take some time for my daughter to receive any money (due to the sale of the house, etc.) but I wanted to take some preliminary steps. I was thinking about having her talk to two to three financial advisors but wanted to see if anyone here had any advice. She could conceivably receive between $50,000 and $70,000 (possibly more, hard to say). In the current economy, I want to just tell her to keep it under her mattress, but that’s not too realistic. Any advice?</p>
<p>Fund a ROTH IRA.</p>
<p>I’d buy a house, great time in the next year, especially if she wants to live in Socal.</p>
<p>I could give advice, but I’m sure a consensus of financial planners would be far more valuable to you than my advice.</p>
<p>One of the best things you can do is to send her to Suze Orman’s website suzeorman.com. She has enough basic information and also links to more info that will give many hours of reading. The best thing you can do is give your daughter information that will enable her to make good decisions about her money. There is no rush to decide, a high yield savings account is a good place to put money until you decide. My best piece of advice anyone game me, is to remember it isnt all or nothing, you can put small amounts in different buckets.</p>
<p>Ummm, there’s no such thing as a high yielding savings account anymore. :(</p>
<p>Since the money won’t come in for a while, I would read a year’s worth of Money Magazine. In a year’s time, most important topics will be covered.</p>
<p>I’ll send you a list of whatever we are planning to invest in. Tell her to avoid those stocks. Yes we are that bad at investing.</p>
<p>Life is divided in phases. Immediate, shortterm, longterm, and family & self. She needs to identify what is needed immediately such as school, apartment, debts, transportation. Shortterm could include more schooling, starting a business, marriage, relocation. Longterm could be family, home purchase, and retirement. Some <em>items</em> will span two or more phases such as life & health insurance, retirement, deductible loans (home & student).</p>
<p>ref: What Color is Your Parachute, any edition.</p>
<p>Put a little bit slowly in many diversified Vanguard Index funds. Just read up on some financial journals. I’d be cautious with financial planners especially if they charge any fees or commissions.</p>
<p>Me too, swimcatsmom. I have a surefire method of predicting when any stock or mutual fund is going to decline precipitously – I invest in it. It’s worked like a charm for me for 20 years. (Of course, if I sold short, the stock would go up.)</p>
<p>I think post #2 had the best idea so far - put that money away into an IRA… into diverse holdings and let it grow.</p>
<p>But an IRA requires earned income and has limits on the contributions per year.</p>
<p>But she’s 22 and probably earning something. And even if she can only put $5,000 a year in, it will grow tax deferred and tax free forever.</p>
<p>I’d go to Vanguard or Fidelity; $5000 into a ROTH IRA, and let advisers at these funds help diversify the rest of the money. Both funds offer free advise and review periodically.</p>
<p>50k to 70k (or more) is an enormous amount of money for a 22 year old. You did not indicate in your post whether the money is being given to your daughter directly (I hope not) or in trust (which would be a far better alternative since a trust might place restrictions on how the money can be used, how much can be distributed at any one time, would provide for trustee oversight, etc.). If the money is going directly to your daughter, I would strongly advise you to consult with a trusts and estates attorney AND a FEE based (not commission based) certified financial planner/accountant for investment and tax advice. The fees for their professional advice will be money well spent. 50k-70k, properly invested, diversified, and tax sheltered, could grow into an enormous amount of money over time. Your daughter is young enough to take advantage of the compounding that time provides. It’s a wonderful gift. Don’t waste it. Best of luck to you.</p>
<p>I’d go to Dave Ramsey’s website and find one of his Endorsed Local Providers. Talk to two of the financial planners and then go with the one you have the best connection with. gbesq has some good advice about fee based versus commission based too.</p>
<p>I would not use a financial planner. It sounds like you may not have a lot of knowledge of this sort of thing and perhaps this is a good opportunity for both of you to learn more. As should have been very evident over the last few years, you can not depend on others to make sound financial decisions for you.</p>
<p>^Precisely why I suggested that the OP consult with a trusts and estates attorney and a fee based financial planner/accountant who has no commission based incentive to sell anything. I don’t agree that the OP and her daugther should go it alone with $50,000 - $70,000 – that’s a pretty big risk in and of itself, don’t you think? OP is not going to be able to set up a trust on her own or determine the tax consequences of her investment choices.</p>
<p>“fee based financial planner/accountant who has no commission based incentive to sell anything.” - my statements are based on my perceptions that no financial planner has handled the past few years correctly and if they did, they’ll be wrong in the next few years. The basic premise that financial planners promulgate is diversification which has been wrong.</p>
<p>^I understand your point, but you’re basing your advice to the OP on the performance of the equities markets over the past few years. Admittedly, the last ten years has been a dreadful period for equities, but that has nothing to do with how equities (or bonds, or real estate, etc. will perform in the future). I’m basing my advice on the long term and, from that perspective, the principles which a good financial planner will espouse – diversification, dollar cost averaging, minimization of sales charges and management fees, prudent tax planning, etc. – all make good sense. In my view, the next fews years are going to be an excellent time for investment because so many markets are depressed now. I stand by my advice that the OP and her daughter would benefit from professional guidance.</p>