Money Advice for My Son

Here are some ideas for a sudden windfall of cash.


My 20-something son recently came into an inheritance from a relative. It's not a huge amount —about $30,000 or so. That’s enough to buy a car, but not much more than that. But he’s lucky, it's more than most kids start out with.

When he was home over Christmas, he seemed a little daunted by the responsibility. "What am I going to do with this money?" he asked me. "I don't want to just squander it."

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As his father, I liked his initial reaction, because I know what a lot of people would do —go buy a Ford Mustang or something. At first I didn't know how to answer his question. The only lump sum I ever had was my 401(k) plan when I left work, and the answer was clear: Transfer it directly to my IRA account.

But when you’re in your 20s, should you be worrying about your retirement account? I don’t think so. A 20-something has more important things to consider, such as how he’s going to live his life. So I finally said: What should you do with the money? Invest it in yourself. Here are my ideas.

Invest in education. You have a college degree, but these days a college degree by itself is not a ticket to success. For a lot of careers, you need a master’s or more. So, are you interested in going back to school, either for a master’s degree, or maybe just to enhance your skills?

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You’re in the music business. It’s a tough way to make a living. If you want to pursue the business end of things, you might use this windfall to pay tuition for an MBA. Or maybe you have some technical skills to learn, and you could take evening classes. Or if you want to pick up your sax again, or improve your guitar technique, take some music lessons. But a word of caution: Don’t go back to school just to go to school. Know what you want to learn, and what you will do with the new knowledge.

Invest in a business. If you don’t want to go back to school, do you have the urge to start your own business? If you do, here’s your start-up money. But I’m not pushing it. You either have that inner drive to start your own business, to run your own show, or you don’t. It’s an “all in” proposition. If you don’t have that “fire in the belly” then you should work for someone else and take a paycheck.

Buy a house. If you’re confident in your career track, you could instead use the money as a down payment on a house or condo. I know nobody’s buying real estate these days and you’re a little young to take this step anyway. But it might actually be a good time to buy, now that prices are down 30 percent from a few years ago. And if you’re pretty sure you’re going to stay where you are for the next few years, it might be the smart thing to do. It will put you on track to own something in this world, rather than rent your entire life from someone else.

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Just save it. If you don’t have the desire to do any of the above, then don’t do anything. For now, put the money aside. Deposit it in a low-cost investment account, invest in a mix of cash and mutual funds, and wait until you are ready to make your move.

But I hope you eventually do get the urge to do something. You have a great opportunity, so don’t be afraid to use it. The worst thing is you’ll lose the money. But is that so bad? You’d just be back where you started. It would be more disappointing to see that money still sitting around 40 years from now when you retire. That would mean you never took a chance.

Tom Sightings is a former publishing executive who was eased into early retirement in his mid-50s. He lives in the New York area and blogs at Sightings at 60, where he covers health, finance, retirement, and other concerns of baby boomers who realize that somehow they have grown up.