Inheriting unexpected sums of money can be helpful in tight situations, beneficial to retirement portfolios, and even allow charitable giving. Unfortunately, though, too many people are short sighted and spend the money frivolously, extinguishing the gift within a year or two.
When my clients inherit money, I coach them to keep the person who left the money in mind as they choose how to use it. The gift probably came from a loved one who worked hard to save the money—we should spend it in a way that honors that person. Sometimes people heed this advice; sometimes they don’t.
I had a client leave $200,000 to her two twenty-something year old granddaughters. We discussed how Grandma saved the money throughout her life and how their decisions about how to use it should honor her memory. Both girls seemed to understand the idea.
Granddaughter A looked at the money as an opportunity. A single mother limited with only a high school education, she chose to use some of the money for tuition to become a dental hygienist. Would Grandma approve of this? Oh, yes.
Granddaughter B also saw the money as an opportunity. She was starting a new job and wanted a new car. Would Grandma approve? Maybe... but then the car needed new chrome wheels... and then she took a trip to Mexico... and her boyfriend needed some money. Pretty soon, it was all gone. Would Grandma approve? No.
Inheriting money can be a blessing. If the inheritor is mature enough to spend the money wisely, it can be a huge benefit. If the inheritor is a spendthrift, the money can be gone in a short period of time with little to show for it... and little to remember the person who toiled to give the gift. Choose to honor those who care enough to share their life's earnings with you.