What Should I Do With My Inherited $20,000 – Investment or Savings Options?

Any instance of inheriting money is one of the most challenging positions anyone can be in. Whether it’s from a beloved family member or a family member you really don’t know, receiving unexpected money can be a life-changing event for most people. 

In this Redditor’s case, their post in r/personalfinance indicates that they received a $24,000 inheritance, and they are unsure of their next steps. While this isn’t enough money to retire on, it’s certainly a good chunk of change the Redditor wants to smartly use after making a few necessary purchases. 

Receiving Unexpected Money

For this Redditor, receiving the $24,000 was an unexpected small windfall after the passing of their grandma, and they are happy to have it. Having spent $4,000 already on a laptop and phone, they now realize they don’t have any immediate need for the money, so they are trying to figure out what to do with it.

Unsurprisingly, the Redditor was inundated with advice, to the point that the mods of r/personalfinance decided to lock the post. One of the initial concerns is that $4,000 for a laptop and phone likely means the Redditor went all out with a top-of-the-line PC or Mac and a brand new iPhone or Galaxy smartphone. 

As you can get phones and laptops for much cheaper, there is an immediate indication that this money needs to be put somewhere, so the Redditor can avoid getting themselves into any more impulsive situations. 

High-Yield Savings Account

At the top of the list is to put this money into a high-yield savings account. While $20,000 isn’t going to grow so much that the Redditor can retire, this is a great start for a healthy savings account. Instead of going out and spending more money on things the Redditor likely doesn’t need, investing this money in a HYSA is one of the best potential scenarios for them.

Not only does this mean they can earn a small bit of money, likely between 3-4% right now, but they have quick access to this money. None of this is to say that the Redditor can’t spend at all, but they have already bought a few of the “wants” they thought they would need, so the rest of the money can be put aside for a rainy day. 

Investment Opportunities 

On the other hand, nothing is stopping this Redditor from doing something entirely different if they don’t need the remaining $20,000 immediately. If they already have sufficient savings, they should invest the money in an index fund or ETF. The reality is that if this Redditor invested this money for the next 30 years and earned a still conservative 7% over time, without any other investment, it would be worth $152,245. This number can fluctuate slightly or significantly depending on the risk level this Redditor is willing to undertake. Still, there is no question that this money can really work for this Redditor. 

Another possibility is to consider investing this money in a Roth IRA for tax-free growth. This is yet another opportunity for the funds to grow, with minimal tax implications, and work for the Redditor in a way that allows them to afford even better phones and computers in the future. 

Most importantly, this Redditor needs to stop making impulse purchases and focus more on their future financial goals. There is no question that this will put a hole in their pocket and encourage them to spend more, but they shouldn’t. It’s not fair to say that they didn’t need a new phone or computer, but beyond that, avoiding any future impulse purchases should be top of mind.

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