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I'm 18 and inherited $50,000

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btermite
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I'm 18 and inherited $50,000  Reply with quote  

As the title of this thread reads, I am an 18 year old rising sophomore in college and have inherited $50,000 from my grandmother who recently passed away. Unfortunately I go to a college that costs about $60,000 a year. I am very lucky to have parents who are willing to pay for my undergraduate education, and with financial aid from the school and the government it only costs me about $30,000 a year to go. My parents have commited to pay for these four years and are not asking me to contribute any of this new money.

After doing some looking around on the internet, I had really wanted to take out a few thousand dollars to do something fun, and then put the rest in something such as a Vanguard mutual fund.
My dilemma with putting my inheritance into investments is having the aid we receive altered. Here is the source of my question, I am far from an expert on financial aid, but from what I have learned the College Board considers 20% of a student's assets when rewarding aid. If I have roughly $50,000 in a mutual fund, this will alter our aid enough that my parents would have to pay around an additional $10,000 a year, which they cannot afford given their current savings plan.

The best solution I had been able to come up with so far was putting the majority of this money into the college savings account my dad set up for me as a child (so it's considered as his asset, not mine) and using it for grad school (which I will for sure attend).
Although putting my money in an account for grad school seems like a good idea and I might be able to limit my own personal debt after school, I was wondering if anyone had knowledge on a way to still invest this?
Is that plan of just saving the money to pay for grad school my best option, or can I make this money work for me in a better way?

Thank you for the help!
Post Sat Jun 13, 2015 4:16 am
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oldguy
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quote:
putting the majority of this money into the college savings account my dad set up for me as a child (so it's considered as his asset, not mine)


You say "putting" - but the legal term is 'gifting'. lol - the IRS might like to be notified if you gift $50k to a relative, and then have it gifted back to you later (Form 709, as I recall).

College in Neb is $60,000/yr? And you use "only" and $30,000/yr in the same sentence? (Just jerking your chain, lol) What are you majoring in & what college?

As for the $50,000k inheritance - I would put it in an SP500 Index Fund at Vanguard or Fidelity and leave it alone. The longterm average return has been 11%/yr - that would be about $400,000 in 20 years (age 3Cool or $1,150,000 in 30 years.

Here's the deal - the power of compounding is awesome, way more than the non-math folks realize. And the 11%/yr value depends on the statistical averaging of the annual ups/downs - ie, it could crash 30% next year - or it could go up 40% - it takes 20 or more years for the data to converge on 11%/yr. What I did was leave my SP500 money undisturbed and borrow for my shortterm needs. (The SP500 Fund was always there in reserve against any foreclosures or bankruptcies, a kind of insurance ). I borrow for cars, houses, rental houses, etc - whereever possible.
Post Sat Jun 13, 2015 5:28 pm
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btermite
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Sorry for my lack of money lingo, as you could tell from my post I am very new to this.
I go to a private college on the east coast, I just grew up in Nebraska.

So you would not think using it for grad school is my best option? I certainly would like to do something like as you have mentioned, invest it and don't touch it. I am still unaware of a way for this to not be counted against me for financial aid. Would it be best if I gift the money to my parents and have them invest it as you have recommended? My main goal is invest as best as I can with as little hit to my financial aid as possible.
Post Sat Jun 13, 2015 5:48 pm
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Wino
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Financial aid is supposed to be for people who need the money. As you just inherited the $50K, guess what! You no longer need as much money as you once did. Gifting will cost you 55% of the monies gifted, so you'd be paying $18K to gift $32K.

You'd be best off to get a student loan for the remainder of the money you need for college and invest the $50K forever in a Vanguard account (the S&P or Total Market would either be good choices), or to use the $50K to pay for college. To change your finances to "qualify" for aid you don't qualify for is disingenuous at best, and deceitful or even criminal at worst.

Why did you pick such an expensive way to go to school? You pick a school that's 4 to 5 times what it should be, then complain about 20% of the total amount? Don't you see a problem with your (lack of) logic?
Post Sun Jun 14, 2015 6:09 am
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oldguy
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quote:
I go to a private college on the east coast,


Again - why? What is your choice of Major that steered you toward spending $240,000 on an education? Medicine?
Post Sun Jun 14, 2015 1:14 pm
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littleroc02us
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Are you going to be a Surgeon or something? The average State University costs around 25k a year including housing and food, so why is this college so ridiculous and what ROI will it have?

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Mon Jun 15, 2015 8:56 pm
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btermite
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Sorry but I don't particularly think the college I attend is relavent to the question. It is one of the elite undergraduate institutions in the country and is often rated in the top 5 best education investments possible. Due to financial aid my parents have to pay roughly $30,000 a year, not $60,000. And I am also not responsible for paying for it, I will graduate completely debt free at the moment.

Do either of you have any ideas on how to best use this money? Am I smartest trying to use it for grad school, or should I try to invest it and risk taking some financial aid hits?
Post Tue Jun 16, 2015 2:27 pm
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btermite
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quote:
Originally posted by Wino
Financial aid is supposed to be for people who need the money. As you just inherited the $50K, guess what! You no longer need as much money as you once did. Gifting will cost you 55% of the monies gifted, so you'd be paying $18K to gift $32K.

You'd be best off to get a student loan for the remainder of the money you need for college and invest the $50K forever in a Vanguard account (the S&P or Total Market would either be good choices), or to use the $50K to pay for college. To change your finances to "qualify" for aid you don't qualify for is disingenuous at best, and deceitful or even criminal at worst.

Why did you pick such an expensive way to go to school? You pick a school that's 4 to 5 times what it should be, then complain about 20% of the total amount? Don't you see a problem with your (lack of) logic?


Thank you for the information on gifting, I was unaware of that. This was the type of response I was looking for, something with some actual information.
I picked such an expensive school because it is an extremely good school, far better education than most. But yes I do see the problem with my "logic," this money was never a consideration when I was applying for schools.
Post Tue Jun 16, 2015 2:30 pm
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oldguy
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quote:
I picked such an expensive school because it is an extremely good school, far better education than most.


"Extremely good school" is a useful investment if you are getting an education in a marketable field - engineering, physics, medical, science - but if your major is Psych, Art, Womens' Studies, yada - you're going to be scrambling to find employment. (I say this because HR sends me 'fresh-outs' to interview each June/July - and the kids seem surprised that I don't jump to hire their new BA Lib Arts skills).
Post Tue Jun 16, 2015 4:03 pm
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Wino
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When I have a baby engineer come before me at an interview, I usually start by saying, "Your degree got you this interview. That's the last benefit you'll see from it. From now on, everything that happens is up to your performance."

Unless you're in MIT (which is really better known for post graduate degrees), I don't see that which school you're in is going to make much difference. But what do I know? I only hire about 1 engineer per month, on average.
Post Tue Jun 16, 2015 4:29 pm
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littleroc02us
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quote:
Originally posted by btermite
Sorry but I don't particularly think the college I attend is relavent to the question.


It's completely relevant when your deciding what your going to major in and the costs associated with getting the education. If the ROI is the same whether or not you go to a 240k college vs a 100k school would you not choose the cheaper. Many of us on this forum that you will hear from are older and wise, we've already gone through the college experience many years ago and are very well educated.
I work at a major University and primarily I'm emplolyed at one of the top hospitals in the world. I watch as a majority of college students aren't being guided by their parents and just attending this University not thinking about it's ROI. Why does it make sense for a student who wants to draw art or take pictures, or computer science for a 100k undergraduate degree. I do see a good ROI if your talking about majors such as mathematics, engineering, law or medical at a great University such as Minnesota's. In fact I support the IT needs of some of the finest doctors in the country who went to Universities or State colleges for much less and are making in upwards of 250k too 750k as surgeons.

What Major is it that you will be studying? And what will make this 240k degree more valuable then a 100k degree?

Risk comes from not knowing what you're doing. (Warren Buffet)
Post Tue Jun 16, 2015 6:33 pm
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MrNewEngland
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Wino woke up on the wrong side of bed.

Wino's points are actually 100% accurate, IMHO. You should give some thought to what he/she is saying. I just wish the tone wasn't so combative.
Post Wed Jun 17, 2015 6:44 pm
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global
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I think the school choice is like a prestige thing. Like if your family/friends went to such and such school. Like some people go to Harvard not because it will help them in life just because the title is cool. It is a known prestigious school so it probably will make it much easier to get some interviews, but for someone with aspirations to be a weather man or something it isn't going to make a huge difference IMO.

I believe a lot of people go to college just because "it is the thing to do." Whenever I was working at a dull 9 to 5 job or just in general people would ask "where are you going to school?" or "what school are you going to?" this made me feel awkward, because everyone from where I'm from goes to college. It is just like a thing or something. The reason why I wasn't at the time was because I wasn't sure what I wanted to major in or if the degree would actually pay off in the long run. I didn't want to just go to school just to go. Whenever I'd say "oh, I'm not going to schoo"l I would get looks of disapproval and occasionally the "You should go to school".

I remember a long time ago I was reading Sherlock Holmes on the beach in Florida. Some drunk beach musician guy noticed and was like "Your reading, that's good. Go to school, get an education." I was in middle school, I believe, at the time and I think not going to school was a regret for him. I never forgot that.

Also, my parents were very pushy. I'm very smart so my parents expected bigger things of me. It doesn't help to see all your friends post pictures of themselves on Facebook with their lives all falling perfectly into place for them. It is unnerving. They all are going to school and going to become successful in life.

Eventually I got depressed at my boring job at burger king where customers get mad at you all day. I made an emotional decision and enrolled in school. My mom talked me into going to this really expensive school that my older sister went to. I ended up caving and agreeing. Grrrr. Why oh why did I do that.

Half way through that semester I dropped out, because the money was just overwhelmingly high. I was thinking. I am never going to be able to pay off those debts and the field I was in wasn't that compelling. I was depressed and I wasn't even getting good grades.

So for the next few years I worked at crappy jobs that didn't pay well. $12.50 was the best I ever got at, but I was working 24/7 there and it was factory work which is awful. Either you get a job with no hours or a job with too many.

I pretty much never spent/spend any money so it has accumulated to quite a bit, but that is also partially due to the fact that I live with my mom and dad still. I'm now 22 and feel like I pissed away 3 and 1/2 years of my life. I dream big, but I lack motivation so I've held myself back.

I've always dreamed big all my life and my current success does not match up to my expectations unfortunately. I'm not gonna lie I am pretty damn greedy. However, I don't really spend money at all which is kind of weird. I'm like scrooge minus the being a mean dick part and having money. I feel like I'm competing against a clock of age and I have to succeed at all the plans I've had in life to fulfill myself. Kind of sad I know.

Recently I've had this fear that I could one day wake up and be 35 and be in the same spot I'm in now. Frantically freaked out I decided to take action and change things. Can't keep watching movies and playing games on the ipad. It is just pathetic and accomplishes nothing. Away with you evil ipad. Away with you. Away with you YouTube videos of top 10 things of such and such. Away with you.

tldr:
So I was coming up with a reason why OP is spending $60,000 on his education and somehow ended up telling my life story. Oops. Basically, if you want to go to school do it for yourself and not because other people want you to. If you don't want to go to school, that is just fine. If you want to spend a lot of money to go to a specific school even if it is a lot. That is fine too. Do what makes sense for you.

There is no secret manual for life. The world holds your hand for you until 12th grade and then you are on your own. Delusions of grandeur will not make everything fall into place for you.
Post Wed Jan 27, 2016 2:29 pm
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global
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Oh crap, just realized you are a sophomore already. So I guess everything I just said does not relate. Never mind. I'm tired. Going to bed now.
Post Wed Jan 27, 2016 2:34 pm
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SCEngineer
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Back to mark....

Talk to your parents about paying for your school now to knock your assets back down, then let them pay $50k worth of grad school. It works out the same way in the end. You'll get hit for 2 years until the assets are out of your name but it's better than paying the tax man to shift assets.

Personally I like oldguy's plan about saving for the future. $50k is a great way to start saving for retirement.
Post Thu Jan 28, 2016 9:13 pm
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