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Dear Top Dollar: Siblings Received a Hefty Inheritance, But Their Desires Go Again Their Late Mother’s Plan.

Caught between honoring their late mother’s wish and the need for financial stability, two teenage siblings grapple with the decision to invest a sizeable inheritance. As they inch closer to making a life-altering decision to invest their inheritance, a rift between their late mother’s wish and their future investment plan emerges, leaving their decision hanging in the balance.

Dear Top Dollar,

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I am a 19-year-old college student and, along with my 18-year-old sister, recently lost our mother to cancer. She was our sole guardian, and following the sale of our childhood home, we each inherited roughly $100,000. Our mother’s wish, although not formally documented, was for us not to touch the funds until we were both over 21 years old and not to spend it solely on our education. We are both diligent students with scholarships, part-time jobs, and additional financial support, so paying for school isn’t our primary worry.

Understanding and Respecting Our Mother’s Wishes

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After receiving the funds, we transferred the total amount ($200,000) into a trust, which isn’t under either of our names. Although this arrangement is recent (about a week old), it’s unsettling to see the money idle. I understand the potential of these funds if invested wisely – it could provide considerable financial relief for us in the future. That’s why we respected our mother’s wish to postpone touching it until we were a bit older. Yet, we still have questions about the best way to handle this inheritance.

Investment Concerns and Previous Experience

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When I turned 18, I opened a personal Vanguard ETF account as I had heard about the importance of starting investing early. But when it comes to the $200,000 in the trust, I’m unsure about the best course of action. I once consulted a financial advisor who suggested investment strategies vary depending on whether the goals are short-term or long-term. The advice made sense, but given our mother’s untimely passing, I’m reluctant to lock the funds away until retirement without having a clear idea of when we might need it. Our needs could range from a house downpayment to graduate school fees or even a car.

Current Dilemma and Need for Advice

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Our family lacks comprehensive knowledge about investments, traditionally focusing on real estate, which is more hands-on than what my sister or I am inclined towards. We’re not planning any reckless spending; in fact, we’re quite conscientious about this unexpected fortune. We aim to honor our mother’s wishes for our financial security, and although we’re living comfortably now, we hope to make a wise decision about these funds soon. We’re close and supportive of each other, so splitting the money right now doesn’t seem necessary, but we’d like to understand if this strategy would be more beneficial in the long run.

In Need of Expert Guidance

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In light of these details, I’m seeking your advice on the following questions: How should we invest the inheritance for optimal growth and future security? What are the implications of keeping the money together versus splitting it? How can we reconcile our possible short-term needs with the aim for long-term growth? Lastly, given our lack of financial literacy, what resources could help us make informed decisions about our investments?

Thank you for considering our issues. We look forward to your guidance on these matters.

Sincerely, Financial Novices for Future Prudence

The Gravity of the Inheritance

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Dear Financial Novices,

Firstly, I commend you both for your maturity and thoughtfulness regarding this substantial inheritance. It’s a serious responsibility, especially at such a young age, and your desire to handle it wisely reflects your mother’s teachings.

Long-term vs. Short-term Investments

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To the point of your financial advisor’s comments about long-term versus short-term goals, they are absolutely correct. Short-term investments usually are less risky, with smaller returns, while long-term investments come with higher risks and potentially higher returns. Given your youth, you’re in a good position to consider some longer-term options that could yield substantial returns down the line.

Diversifying Your Investments

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You should absolutely be diversifying your investments. This could involve a mix of stocks, bonds, and possibly even a small portion of real estate. But as you mentioned, it seems you are looking for a more ‘hands-off’ approach at this point in your life, so I would lean towards investing in index funds and consider low-cost passive index ETF such as VOO or VTI.

It’s typically a good strategy to spread your investments across multiple areas to balance risk and potential reward. At this stage in your life, it sounds like you probably won’t be earmarking the money for any specific financial needs over the next five years or longer, so I would probably keep the majority of your money in low management fee stock ETFs and less in bond funds, which tend to yield lower returns than stock over the long run.

To Split or Not to Split

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Regarding your question about splitting the inheritance or keeping it together, there’s no one-size-fits-all answer. Your strong relationship as siblings is commendable, but it’s important to remember that your financial situations or goals may differ in the future. Discuss your aspirations and consider consulting a financial advisor together to determine the best course of action.

Remember you are two different individuals, and as time goes on, you likely will deviate from your own individual families, lives, career aspirations, health concerns, etc. So I would advocate splitting the money sooner than later, as this will make it cleaner when the time comes for either of you to have needs for the money or express different risk tolerances depending on your specific plans for the funds in the future.

Educate Yourself

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Lastly, and perhaps most importantly, continue educating yourselves about finances and investments. There are plenty of online resources, books, and courses that can help improve your financial literacy. This knowledge will be invaluable in helping you make informed decisions, now and in the future.

Although I do not think it is necessary for you to seek a financial advisor immediately, gaining more knowledge is a valuable step to making smart money and investment decisions over the long run.

You are already approaching this complicated time in your life with astute questions. The next best steps are to continue learning about specific investment assets and begin to consider your financial goals so you can choose investments that meet your time horizon and risk tolerance.

Sincerely, Top Dollar

What Do You Think?

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What are your thoughts on their dilemma?

What would you do if you found yourself in this same situation?

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Josh Dudick

Josh is a financial expert with over 15 years of experience on Wall Street as a senior market strategist and trader. His career has spanned from working on the New York Stock Exchange floor to investment management and portfolio trading at Citibank, Chicago Trading Company, and Flow Traders.

Josh graduated from Cornell University with a degree from the Dyson School of Applied Economics & Management at the SC Johnson College of Business. He has held multiple professional licenses during his career, including FINRA Series 3, 7, 24, 55, Nasdaq OMX, Xetra & Eurex (German), and SIX (Swiss) trading licenses. Josh served as a senior trader and strategist, business partner, and head of futures in his former roles on Wall Street.

Josh's work and authoritative advice have appeared in major publications like Nasdaq, Forbes, The Sun, Yahoo! Finance, CBS News, Fortune, The Street, MSN Money, and Go Banking Rates. Josh currently holds areas of expertise in investing, wealth management, capital markets, taxes, real estate, cryptocurrencies, and personal finance.

Josh currently runs a wealth management business and investment firm. Additionally, he is the founder and CEO of Top Dollar, where he teaches others how to build 6-figure passive income with smart money strategies that he uses professionally.