Excellent Question on Inheritance

I received a question on Facebook and wanted to answer for all to see. This student has some very good questions and wants to make an informed choice vs. just listening to her parents. Although, some parents have excellent advice many are in financial distress themselves. I am a believer in educate yourself, listen to valuable resources and then make a decision. Then if it goes well you can feel good if it doesn't - you only have yourself to blame and learn from the lesson.

I have some questions about money stuff. I should ask now so I have a general idea of what to do. I just got the money that I inherited from my grandmother this past weekend. its enough to pay for the rest of my time in college so I don't have anymore student loans (which is amazing)but I have some money left over about $3000 what should I do with it? I want to save most of it but don't know where I should put it/what kind of account I have a savings account already, should I put it in there? and I don't know what to do with the chunk of money for next years tuition. what type of account it should sit in until I need it. my mom is trying to give me ideas but i want to have the final decision of what type of account it will be in.so.. suggestions?

First off, I am sorry for your loss. Inheriting money is about the least desirable way to obtain a windfall. But your questions are excellent.

Some basic money rules:

• Any money you need in the next 2 - 3 years should be in a very safe account. Savings, checking, money market that is FDIC insured. You do not want to take any risk with this money. You may not make alot of money in interest but the money will be there to pay your bills.

• Regarding the remaining $3000. It depends on when and how you want to use it. If you want to use the money after graduation for a car or house, then you may want to put it into a low risk mutual fund. Something that has a timeline feature. So if you need the money in 2014 - then check with a company like Fidelity Investments or T. Rowe Price and asked about their no load time based funds. Again, you are not going to get rich but it will be invested in the market in a diversified account for the appropriate risk for your time frame. This will give you the opportunity to make more than a savings account but remember you are taking on risk and may lose money if you need it on a specific date. If you can ride out the ups and downs of the market - and are not tied to a specific time line - you can wait for the market to rebound and hopefully make a few bucks.

• Another option is and my favorite if it applies. If you do not need the money and can save for retirement - put it in a Roth IRA. Again, use firms like Fidelity Investments, T Rowe Price, Vanguard to invest in time based funds. You would be looking at funds with the year ending 2050. The younger you are when you start saving small amounts of money for retirement. The better your opportunity for success. One factor is you have to have earned income to contribute to an IRA. So you will want to check the rules when you call the Investment Firm you opt to use. Also, never pay a load on a fund. It should not cost you money to investment small amounts of money, beware of back end loads - meaning you have to hold the investment for a certain amount of years to avoid a penalty. Look for NO LOAD funds.

Keep the questions coming and congratulations on educating yourself.

Stay tuned........