There are many options that people can do with their money, whether it is their hard-earned money or inheritance money from their parents or grandparents. These include spending the money, giving it to a charity, giving it to a bank, giving it to your children, or investing it wisely.
Among these, the best option is to invest your money since it will grow your wealth over time and later on when you are close to your death bed, you can distribute it equally among your children. Even though giving the money to children is not desired by many people; still, according to studies, young Americans or millennials are taking over the wealth of their family at a quicker rate as compared to the last generations.
In fact, another study indicated that millennials are not at all reckless with their money. A study, published by UBS recently, depicted that Americans that are between the ages of 21 to 36 are the thriftiest bunch from the time of the Great Depression. The reason behind this can be the economic disorder in the previous few years, in addition to the competitive job market and huge levels of student loan debt.
So, if you’re a millennial or belong to the Y generation, then you too must take measures to invest your money or inheritance. Rather than making a big purchase, spending, or splurging your inheritance money, you should invest it, no matter what the amount is. This way you can get interest on your inheritance money over time.
And, if you’re facing any legal issues related to inheritance, will, power of attorney, trust, or other such legal details, then you should obtain legal advice from a reputable attorney as soon as possible. You can invest your inheritance money without much risk through these options.
1. Pay off your debt(s)
If you have any outstanding debt, including student loans, mortgage debt, and credit card debt, then you should pay it down using some part of your inheritance money. For other debts, such as mortgages, you need to reckon its interest rate and compare it to the expected return that you’ll get from your investment. If the debt is at a high rate, such as over 5%, then you should pay it off; otherwise, you should invest your money.
2. Save more for retirement
Since right now you’re in your young age, you can invest your money today and grow it with time. For instance, if you invest $10,000 right now at a rate of 6% return rate, you can get $102,857 when you retire in 40 years.
Even if you spend all your salary, you can put your inheritance money in your retirement savings accounts so that you can shelter that money from taxes and get tax-free returns. Therefore, you must put more money in your retirement savings accounts, including 401(k) and IRA (Individual Retirement Account). Both these accounts offer tax perks if the money is used for retirement.
3. Invest in your long-term financial goals
When you know your long-term goals according to their priority, you must take measures towards them. But this can only be done after you address your debts as well as bad financial habits. For this, you need to analyze your cash flow so that you can know the amount of money you will need in the short-term as well as the long-term for channeling your money in the right direction.
Your long-term goals can include opening a business, buying a house, etc. You can invest your money accordingly, like in the stock market, if you don’t require your inheritance money for a minimum of 5 years.
Your investment portfolio should be balanced with an amalgamation of bonds, CDs (Certificates of Deposit), mutual funds, real estate, and stocks. Your stocks should include foreign, domestic, large companies, and small companies’ stocks in order to safeguard your money from a decline in any particular area.
Thus, investing your inheritance, which you get from your parents or grandparents, can let you grow your money and plan for your future accordingly. Even though investing in your young age may sound boring to you, making a start in your 20’s is the best way you can climb the ladder of financial security.