When it comes to getting an inheritance, one option for using the funds is saving money.
In a recent column for the Los Angeles Times, Liz Pulliam Weston fielded a letter from a reader who had just gotten a $100,000 inheritance. The reader noted that her husband earns $100,000 a year and that they owe $132,000 on their mortgage, which they have considered paying down with the inheritance.
Pulliam Weston noted that the reader may be able to put the money to better use than paying down their mortgage, which probably has a low rate and may be used as a deductable on taxes. One thing she suggested is saving money in an emergency fund.
“Most people should have an emergency fund equal to three months’ expenses, but families with just one earner typically should shoot for six or even nine months’ worth,” Pulliam Weston wrote.
Another option would be saving money for their children’s education. Though the reader said they intended to have their children pay for college through student loans, Pulliam Weston noted that doing so could damage their offspring’s financial future.
One way to divide the inheritance would be to cut it into thirds. One third could go to an emergency fund, another to their children’s education, and the final third toward retirement.
According to the most recent statistics from the Bureau of Economic Analysis, the amount of personal savings dropped from $486.8 billion in June to $458.5 billion in July.