We live rent-free and just received $80,000 in inheritance – what’s the best way to put this to work for our future?

Losing a loved one can be a devastating thing — even if you end up with an inheritance afterward. But if you’re getting that inheritance, it’s important to put that money to good use.

In this Reddit post, we have a couple in their mid-30s with three young children. Because they’re church employees, they’re able to live rent-free for now. They also have no debt and a modest retirement nest egg and college fund for their kids.

They’re wondering what to do with the money they’ve just inherited. While they want to boost their emergency fund, they’re not sure what to do with the money beyond that point.

It’s an important question to be asking. So the couple needs to decide what takes priority for them.

How to manage an inheritance

If you’re the recipient of an inheritance, it’s important to use that money to address your personal needs and goals. Generally, it’s wise to start by making sure you have a full-fledged emergency fund and that you’re able to shed costly debt, like credit card balances.

Once you’ve addressed those near-term needs, you can move onto longer-term needs and goals. A good way to make the most of an inheritance is to use some of the money as a down payment on a home.

The nice thing about homeownership is that you can build equity in an asset that gains value over time. Plus, owning a home can be a means of financial stability.

It’s also wise to use an inheritance to start or boost a retirement nest egg. If you’re fairly young, earmarking that money for retirement gives you a long window of time to invest and grow it.

In the poster’s situation, the good thing is they don’t need to use their inheritance to pay down debt. Once they’ve gotten their emergency fund to a solid place, they can take the remainder of the money and split it between a home down payment and investments for retirement and college.

It’s generally best to prioritize retirement savings over college savings. But the tricky thing about the latter is that most people have a shorter window of time to save for college than to save for retirement.

So let’s say the couple is getting an $80,000 inheritance and needs $5,000 of that to complete their emergency fund. From there, they may decide to split the remainder equally so they’re putting $25,000 into a home, $25,000 into a retirement portfolio, and $25,000 into a college fund.

Another option? They could put half of the money toward a home and the other half into a Roth IRA, which could serve as a “flex account” they can use for either retirement or college, depending on what their needs look like at the time.

It’s a good idea to get help managing a windfall

The couple in this situation is coming into a decent sum of money, but they don’t have to manage it alone. If you end up with a sizable inheritance, it’s a good idea to consult a financial advisor for guidance.

A financial advisor can help you make the most of your windfall and help ensure that you’re addressing your most pressing needs first. They can also set you up with investments that are conducive to meeting your various goals.