Issue #222: What to do with a mini-inheritance

Hi y’all —

In December, my grandmother on my mom’s side — who I call Oma — passed away. At age 84, she’d lived a long, full life, but I already miss her terribly.

Oma was a faithful reader of Dollar Scholar, and a frequent inspiration: You may remember her from Issue #119, in which I debunked her theory that writing “see ID” on the back of credit cards is safer than signing them.

In true Oma fashion, she made sure to leave me with one last idea for the newsletter. Before she died, Oma gave me $5,000. It’s like an unofficial inheritance — a sum she wanted me to spend on something meaningful in her memory.

Now, $5,000 isn’t a gigantic amount of money, but it’s certainly not nothing. And grief aside, I have absolutely no idea how to proceed.

What should I do with a mini-inheritance?

Katherine Fox, founder and financial advisor at Sunnybranch Wealth, tells me it’s normal to feel intimidated. There’s a stigma around talking about money in general, and it can be worse with unexpected windfalls like this. People (like me) often feel awkward asking questions about wills and estate plans because they’re afraid to seem ungrateful.

In reality, though, she says “it’s not money falling out of the sky — it’s money you get because someone you’re close with has died.” In that sense, part of her job is “giving people permission to feel all kinds of ways about an inheritance and take time [deciding] what to do,” Fox adds.

That aligns with another tip that I got from Jordan Gilberti, senior lead planner at Facet: to take a step back. If I move too fast, he says, it might be tempting to spend the inheritance on something I don’t need (or even really want). Then it'll be gone, and I'll have nothing to show for it.

Rather than running out to blow the $5K immediately, Gilberti suggests taking careful stock of my overall financial picture. Do I have high-interest credit card debt that’s stressing me out? Is my emergency fund fully stocked with three to six months’ worth of expenses?

“Where to put the money is highly dependent on your personal financial situation and goals,” he says. “Ask yourself: What is it that I prioritize right now? Is it being debt free? Is it being able to retire early? Or maybe it’s a trip you’d like to take in a year.”

Fox says it’s key to press pause and truly consider whether I’m putting the money towards a project that’s going to have an impact on me — one where, years down the line, I’ll be glad I used it in the way I did. That's not a quick decision.

If my goal is a relatively short-term one, I could put the cash into a high-yield savings account, which are currently offering higher-than-usual interest rates thanks to the Fed. (This is also a solid option if I don’t know what my future will bring and I’d like to park the money somewhere while I figure it out.) If I have a longer-term goal, I may want to invest the money or stash it in a retirement account like a Roth IRA.

I don’t necessarily need to feel pressure to keep the $5,000 all together, either. I could, for instance, donate some of it to charity.

To accomplish this, Fox says a good place to start is thinking of whether there’s a cause or organization that I connect with and that I imagine Oma would connect with. 

Is there an activity that we always liked to do together? What did my grandma care about or enjoy spending time doing, and is there any overlap with what I care about or spend time doing? This exercise is an easy way to avoid getting overwhelmed by the options.

Another strategy: I could give a couple hundred dollars away, then spend a couple hundred dollars on a special treat.

“It can be nice to take a portion of it that feels meaningful but not huge and do something that your grandma would have enjoyed,” Fox says, like shopping for a pair of shoes I know she’d get a kick out of.