When a friend or loved one pass away and leaves you an inheritance as their final gift, you are in a unique situation that could go one of two ways. You could spend the money on the things you want and enjoy the inheritance temporarily, or you could invest the money wisely and reap the benefits for the rest of your life. Here’s what you should do with your inheritance money to make the most of it.
Open a High-Yield Savings Account
While a savings account should never be the only place you park your money, it’s a great short-term solution that you should absolutely utilize immediately after receiving the funds. After all, when a loved one dies, there’s a grieving process and you might not want to start thinking about diversifying your portfolio just yet. However, rather than simply sitting on the check, deposit it into a high-yield savings account where it can earn interest until you’ve decided how to allocate the funds.
Create (or Add to) Your Emergency Fund
Most experts agree that you should have somewhere between three and six months’ worth of salary saved in a standard savings account for a rainy day. If you or your spouse are ever laid off from your job or unable to work for any reason, having those funds set aside can make a huge difference. If you don’t have an emergency fund, use your inheritance money to create one. If you have less than six months’ worth of salary saved back, use the inheritance money to beef it up.
Meet with a Financial Advisor
Dropping money into a savings account is simple enough, but investing your money in stocks, bonds, EFTs, index funds, mutual funds, stock options, and more can be a bit overwhelming - especially if you’ve never traded before. Schedule a consultation with a financial advisor to learn more about how this beautiful gift can help you enjoy an entire lifetime of financial security. By allocating your funds wisely - and according to your own personal needs and risk tolerance - you’ll find that investing isn’t quite as scary as it might seem.
Buy Real Estate
Depending on the size of your inheritance, if you are able to do so, it may be wise to use part of those funds to invest in real estate. Don’t just buy any house or property, though; do some research so that you can get the best possible returns on that investment. Real estate remains one of the stablest and strongest investment opportunities out there, but only when you invest wisely. Ideally, you should meet with a realtor to determine which properties are best suited for you. If real estate is a bit overwhelming, your financial advisor can help you with REITs, or Real Estate Investment Trusts. Rather than investing in property directly, REITs allow you to invest in the major real estate companies and share their profits.
Getting an inheritance is bittersweet, and it can be difficult to know exactly what to do with the funds once you have them. Though it’s always a good idea to start off with a high-yield savings account, you will eventually want to diversify your investments and allocate them in a way that will provide you with the best possible returns. Contact a wealth management and financial advisory firm to get started today.