Gifted Money
Hello Terry,
I am looking for some advice about being gifted a lump sum of money and what I should do with it in my situation. For context, my Dad is a successful business owner that has recently sold his business. He is unbelievably kind and generous and decided to gift each of his children $18,000. I am 28 and living in Chicago. What is the best way to invest this money? Thanks!
Terry Says
Aha — I’m glad you reached out for advice. In fact, if you’ll reply to the notification email with your mailing address, I will send you a copy of the last edition of The Savage Truth on Money. (The numbers are a bit outdated, but the “truths” are timeless and will guide you to a good start at investing!)
First step — deposit this check in a money market deposit account at your bank.
Next: pay down all your credit cards.
Third: Read this: T-Bills beat CDs – Terry Savage Open an account at TreasuryDirect.gov per the instructions, and buy $10,000 worth of 6-month Treasury Bills, and instruct them to automatically renew 3 times — and in the future, keep extending the renewals. (The article explains.) This is your “chicken money” — and it will earn interest — and be sort of out of your hands — so you won’t be tempted. I hope you never need to “invade” this money — but it will always be there for you. Forget you have it!
Fourth: If you are working, you need to sign up for the 40l(k) plan at work. But if you have earned income and no retirement plan, you can take about $5,000 of that money (leaving $3,000 now in your MM account) and open a ROTH IRA at Fidelity.
The book will give you instructions, but I suggest just buying the S&P 500 stock index fund with that $5,000. Since you can put up to $7,000/year into that account — IF you have that much earned income — then you can add a few hundred dollars more every month — regardless of whether the stock market headlines are up or down. Over the long run, you’ll be glad you did.
Read the book for details.
