Have a pile of money coming your way? Read on for options that can help you put that cash to good use.
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Losing a loved one can constitute a major blow — one that money can’t make up for by any means. But the reality is that losing an important person in your life could leave you in line for an inheritance of some sort.
Over the past decade, 17% of U.S. adults received an inheritance, according to data from New York Life. And in the next 10 years, 15% of U.S. adults expect to receive one as well.
An inheritance can run the gamut from a few hundred dollars to a few hundred thousand or more. If you’re in the latter boat, you’ll probably want to hire a financial advisor who can help you figure out what to do with that money.
But what if you’re looking at a $10,000 inheritance? That’s still a lot of cash. Here are some options you can look at if you’re in line for a windfall in that range.
1. Put it into savings as your emergency fund
A recent survey by SecureSave found that 63% of Americans don’t have enough cash reserves to cover an unplanned $500 expense. If you’re lacking in the emergency fund department, a $10,000 inheritance could help you get to a place where you have a solid amount of financial protection.
Ideally, you should have enough money in your savings account to cover three months of essential expenses. So if you spend around $3,000 a month, a $10,000 emergency fund will give you enough cash to pay your bills for three months in the event of job loss, plus a little extra in case your car breaks down or your roof springs a leak.
2. Reserve it for a down payment on a home
In July, the median U.S. home sold for $406,700, according to the National Association of Realtors. If you’re hoping to buy a place of your own, a $10,000 windfall could go a long way toward your down payment. And remember, the more money you put down at closing, the less of a mortgage payment you take on.
Of course, now’s not a great time to buy a home given that borrowing rates are high and home prices are elevated. Plus, there’s not a lot of inventory to choose from. But things could change in a year or two. So you may want to keep that money in a separate savings account so you know that it’s earmarked for a home purchase.
3. Invest it for your future
It’s not easy to carve out money for retirement savings purposes. And so if you’re suddenly sitting on $10,000, you have a prime opportunity to set yourself up nicely for the future.
Over the past 50 years, the stock market has delivered an average annual return of 10%, as measured by the S&P 500 index. If you invest $10,000 today and leave your account alone for 40 years, it has the potential to grow into a little more than $450,000 if you snag a comparable average annual 10% return in your portfolio.
It’s never easy to say goodbye to an important person in your life. But if that person leaves a financial gift behind for you, do your best to make the most of it. It’s a great way to honor your loved one in the course of setting yourself up for financial success.
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