Ask Terry Questions Gifted Money

Gifted Money

By Terry Savage on July 02, 2024 | Wild Card

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  (The numbers are a bit outdated, but the “truths” are timeless and will guide you to a good start at investing!)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 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.




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