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Help a trust fund baby: “What should I do with my inheritance?”

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Just got this email from Christine, a self-described “trust fund baby” who asked for advice. What would you recommend?

I am a 22 year old female in my last year of college. I never learned how to manage my money. If I got money, I spend it. So, freshman year of college, a credit card seemed like a fantastic idea. My parents have even bailed me out a few hundred dollars. I’ve kind of come to terms with the fact that this is a stupid move on a lot of students parts, and I’m working through it.

Recently, I learned of a pretty good deal of money – $140,000 give or take – that my well-off, childless aunt and uncle have put into a trust fund for me.They have brought it up to this amount by contributing $30-40k at various times over the past 10-15 years. Anyway, my question is: what should I do with this money?

What do you think?

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  1. Don’t touch it! Unless you’re facing Chapter 11 or 13, medical emergencies, or wondering about financing for a home, there should never be a reason at your age to touch that money.

    Talk to a financial advisor. Figure out what you want to do with your life, and how to best utilize the money given to you to achieve those goals.

  2. Playing it safe would — to me — suggest sinking it into the highest return savings account you can find and sit on it.

    Playing it less safe? Biotech stocks. Sciencewise, there’s a lot of stuff going on in terms of organ cloning, implants, etc. Find a good investment fund and pick out as much biotech as you can. Nothing’s a sure bet, but that’s where I’d put money if I was looking to invest.

    Of course, *I* don’t have your trust fund to decide about, either. 😉

  3. Do not spend it. Decide what your goals are, i.e. a house in several years, etc., and research what type of investment will fit you. Vanguard is a good place for a beginning investor.

  4. Don’t touch it! At least until you’re 30, or you learn to become honest-to-god responsible with your money. Use it to buy a house out right, or save it for your own family’s use one day.

  5. Pay outstanding debts… especially any credit cards, start a Roth IRA max the contributions on that and retire comfortably.

  6. Buy an index fund and leave it for 30 years. Profit.

  7. invest $100k into some long-term investments. some index funds, some bond funds, and such. use $20-30k to pay off/down debts, and establish a minimum $10k emergency fund in a high-yield savings account. touch that money only in an emergency. take $10-20k and use it to do stuff. buy a car, travel, buy a house/condo, whatever.

  8. My vote is pay off all of your debt (if you have any), and then put the rest away for a house.

    If you ever want a house, you’ve got a great start in saving up for it. You pay almost double for a house over the full life of a mortgage, and you pay significantly more interest than principle early on. You’re in a great position because you don’t have to pay for access to money, you can just pay cash for the house. Then you’ll free up something like 25% or more of your income to live really comfortably and start building a great amount of wealth.

  9. First, she should understand that $140,000 is not a lot of money. She will be broke before she knows it if she continues her habits.

    I suggest spending a little bit of it on something you want, giving a bit of it to charity or your church, paying off your debts, and then investing the rest.

  10. Invest wisely.
    Regarding Grace’s advice; 9/10 drugs fail when they enter phase 1 or 2 clinical trials, so invest a smallish bit (10%?) in that sector. (That’s where I work).
    Regarding Aaron and Alan’s advice; Exactly. Find a way to shuffle as much money/earnings into long-term yet stable investments.
    I am 30, just started a 150k salary and am investing max for my 8 and 5 year old. Methinks they will be thankful as I enter the rest home.