<p>Tell you what we did. We neglected to “do” anything with my H’s last bonus, and it is still in the bank, earning interest.</p>
<p>Everything else we had “invested” is down 30%. :eek:</p>
<p>^That’s pretty much what we’ve done with the money my husband inherited when his parent’s estate finally came to him. (It’s in CDs.) The theory is that some of it will go to a kitchen renovation, but I’m too busy (and undecided about what I want and how much to spend) to think about it!</p>
<p>Michelle Singletary is another author to check out for financial advice. She has a regular column in the Washington Post.</p>
<p>As for the inheritance: One way to honor the gift is to not save it all. Maybe some charitable donations are called for. Maybe a trip that the godmother would have liked to take her god-daughter on had they both been in good health and free to travel at the same time. A chunk of my inheritance went on a once-in-a-lifetime trip to visit friends and family in Australia. Every penny of that trip was very well spent. Our only regret is that my mother’s money went with us rather than her, herself.</p>
<p>The old money advise is always to consider capital, such as inherited money, as untouchable, and to never draw more then 5% per year. You might consider planting such an idea. </p>
<p>If the money is left accessible, it will be spent. Encourage her, that what ever investment she choices, to be sure that it is difficult to withdraw. IRAs, CDs, index funds w/o checking function, anything that has an impediment to impulse spending will help her make better, more well thought out decisions. </p>
<p>Sadly, boyfriends and husbands sometimes see someone-elses nest egg as theirs. They can bring tremendous pressure to bear. Any impediment to withdrawal will help her fend off this difficult situation.</p>
<p>Sadly, boyfriends and husbands sometimes see someone-elses nest egg as theirs. They can bring tremendous pressure to bear. Any impediment to withdrawal will help her fend off this difficult situation.</p>
<p>What toadstool states is very often the case. If your D does marry she can keep these funds separate in her own account. Unless she comingles the funds or signs a document giving her spouse property rights the funds remain in her name and her control.</p>
<p>I have heard it recommended to people who receive a lump sum like this to spend about 10% on something fun/special/etc, what ever your DD wants to do.</p>
<p>Then invest the rest- investment can be individual stocks, mutual funds, bond funds, cash in the bank, annuities, even cash value life insurance…we have old IRAs that were put into IRA annuities at a large mutual life insurance co; they just keep going up and performing as promised…should have funded out Roth contributions that way in the up markets of the 2000s!</p>
<p>That is a really good point about other people- I would encourage her to NOT tell any friends about the existence of this money, it just does not need to be common knowledge outside your family. That would be normal for an adult/parent not to share these details with the public, but a young adult/student may still share everything with her friends.</p>
<p>I’d definitely see this as an opportunity to learn about investing, agree that she should talk to tax and finance professionals, but learn how to do it herself. (Perhaps she could join, or start, an investment club.)</p>
<p>You say she wants to give some to charity, which is great! I’ll suggest she set up a trust for this so that she can give money over the long-term, not just a one-shot deal. The Daughter Charity Fund, let’s call it, or DCF for short. She funds the DCF with … oh, $5,000. The trust invests that money and next year, gives away 80% of its income, leaving 20% to help grow the endowment (or whatever percentages make sense). The following year, the DCF does the same thing. And so on. </p>
<p>Maybe for graduation, you give her, amongst the jewels and new car and condo you’ve gotten for her, an extra $100 to add to her trust. Maybe she gets a signing bonus for her first post-graduation job and puts a quarter of it ($2,500, let’s say 
) into the trust, as she is grateful for her good fortune and intends to share it by growing the DCF.</p>
<p>Each year, the trust donates 80% (or whatever percentage) of its earnings. If it has a serious financial setback, perhaps some years it donates only 50%, because its value has dropped, and so on.</p>
<p>By the time 30 years has gone by, the money your D put away in a Roth has grown into a tidy sum; she also will have supported 30 years of charitable giving, and may have grown her trust into something bigger than a one-time contribution. Not that there’s anything wrong with one-time contributions, but she has an opportunity now she’s unlikely to have for a long time, so perhaps she’d like to consider this.</p>
<p>I am in the Financial Services Industry (don’t worry, I don’t sell to retail), and I did a stint as a Financial Advisor for a major wall street firm.</p>
<p>Your Daughter’s entire financial picture will need to be evaluated to plan for the USE of the $50,000 to $70,000, even if that USE is for retirement. If your Daughter has debt, my first recommendation is to payoff the debt. However, it also depends on the nature of the debt, and whether your daughter is otherwise financially responsible. It doesn’t do her any good to payoff her credit cards just to have her run up the balances again. Also, if she is still in school, it doesn’t do any good to payoff subsidized loans if she is going to take out more.</p>
<p>I would also look at her one-time expenditures over the next few years: school, car, wedding, etc. Setting aside money for those would imply low risk, low return investments.</p>
<p>Does she have an emergency fund?</p>
<p>What other big expenditures are on the horizon? Purchase a home? Set aside for her kid’s college?</p>
<p>Depending upon WHEN she will need the money will help determine HOW to invest it. If she won’t need it until retirement, then a ROTH is a great idea. Start with index funds. If she needs it in the next few years, then CD’s are easy and safe.</p>
<p>Feel free to PM me.</p>
<p>Thanks again to everyone for taking the time to respond. You’ve brought up some great points to consider. First of all, my daughter hasn’t told anyone…she doesn’t see the point. She has no debt and is very responsible with money. So far all she has said is that she can now finally afford the lava lamp ($100) that she has wanted for the past year :)She may charge something but only a couple of times has she ever not paid the bill in full each month. My daughter took a couple of years off after graduating high school and is now in the process of transferring to a Cal State, so she won’t have any undergrad debt. </p>
<p>Her car is a 1998 so a “new” used car will be something to consider in the near future. Her “emergency fund” probably consists of $400 in a savings account. She only makes $400-$500 per month by working two part-time jobs and tutoring, but she has set up automatic deductions of $20 per month going to her savings and $20 per month into a mutual fund account…which is probably not worth too much now. (I don’t even feel like looking it up.) We have tried to teach her the rule about saving 10% of her income no matter how little it is. </p>
<p>OperaDad…so far no husband and as of right now, she doesn’t want to have children :(</p>
<p>Owlice…I loved the idea of establishing a charitable trust and I think my daughter will like that idea, too…even after all the jewelry, car and condo :)</p>
<p>My daughter inherieted money from a family friend, similiar situation. It was a blessing and a gift. Such a wonderful investment in their futures. We invested in several conservative avenues. Some liquid, some not. My point now and to them was that this gift bought you several things: 1.breathing room during your college room. They dont have to work quite as many hours to pay their tuition-can concentrate on school. 2. options later. They can pay off their college loans quicker if they choose. They can manage a down payment on a house. They can buy a better (not extravagant) vehicle when needed. 3. security. They have an emergency fund should life throw a curve ball. </p>
<p>And the point made earlier was addressed as well. Some of this money should be protected when and if they marry/partner etc.</p>
<p>I’m surprised no one has mentioned learning about asset allocation and index investing. I wish I’d known about these things when I was in my 20’s - or my 30’s or early 40’s, for that matter.</p>
<p>If this were my kid, I would suggest that she spend $12.32 of her inheritance on the “Bogleheads Guide to Investing”. Then check out some of the books they recommend - from the library :-). The Coffeehouse Investor by Bill Schultheis is a short classic, very easy to read. (Full title: “The New Coffeehouse Investor: How to Build Wealth, Ignore Wall Street, and Get On With Your Life.”) Maybe look for Rick Ferri’s “All About Asset Allocation” and/or one of Larry Swedroe’s books.</p>
<p>Your daughter sounds like a natural Boglehead to me and I think she would enjoy learning about these ideas. (This is what some index investing fans call themselves.) You might also want to post your query on the Bogleheads forum (diehardsforum.org), but I bet the first thing they would suggest to your daughter is to take her time and read a few beginners’ books.</p>