It sounds like a dream come true—a huge inheritance that could change your life. But what if you’re making a huge mistake with it? Many Australians are set to inherit a whopping $5.4 trillion over the next 20 years, but experts warn that a lot of them will waste it by acting too quickly. So, what should you do if you’re lucky enough to come into a windfall?
Inheritance Windfall: The Urge to Act Quickly Can Lead to Mistakes
The first thing many people do when they receive an inheritance is rush to make decisions. Some may immediately spend the money, others might stash it away in a low-interest savings account, thinking it’s the safest option. While this seems like a good idea at first glance, financial experts suggest that acting too quickly is a mistake that could cost you big time.
Pete Brewster, a financial planner from Bridges Financial Services, points out that it’s easy to get caught up in the excitement. But that’s when the mistakes happen. “People are really hesitant to dig their toe in and make some big decisions because they haven’t got all the information and life can be uncertain,” he explains to Yahoo Finance. Holding your inheritance in cash, especially in savings accounts with interest rates below inflation, is actually losing value over time.
A More Thoughtful Approach
Instead of rushing, Brewster recommends taking a step back. He says that while it’s important to enjoy the windfall, it’s even more crucial to think long-term. You need to decide how the money fits into your overall financial situation. This will look different depending on your life stage. For instance, a 30-year-old with a mortgage might use part of the inheritance to reduce debt, whereas a 55-year-old nearing retirement might consider putting it into superannuation or using it to help the next generation.
For amounts between $10,000 and $50,000, Brewster suggests using the money for immediate financial relief, like paying off high-interest debt or building an emergency fund. This could help free up cash flow in the future, creating more financial security. If you’re employed, putting as little as $100 a week into your superannuation could offer great tax benefits.
Think About Your Future
While it’s tempting to splurge or put the money away in a safe account, Brewster emphasizes that thinking ahead is key. What are your goals? If you’re younger, a $50,000 inheritance could help ease the stress of your mortgage. For older Australians, it could go toward improving retirement plans or providing for family members. The bottom line? Don’t just look at the short-term gain. Reflect on what matters to you long-term, and seek financial advice if you’re unsure.
