5 Best Ways To Invest Your Inheritance (2024)

A loved one’s death will likely be one of the hardest things you’ll ever have to endure. While dealing with the grief, making funeral arrangements, and taking care of other responsibilities, making a plan for any inheritance your loved one left you is probably the last thing on your mind — but it’s an important task that shouldn’t be neglected.

When money falls into your lap, it’s tempting to go on a splurge, but consider investing it. Whether your inheritance is $5,000 or $500,000, putting that money somewhere it can grow over time is a smart move. Here are the best ways to invest your inheritance money without too much risk.

A certificate of deposit, or CD, is one of the most conservative and safe investing vehicles for your inheritance, since they offer a predictable return and are protected by the Federal Deposit Insurance Corporation (FDIC). That means your money — up to $250,000 of it — is insured even in the unlikely event of a bank failure.

CDs offer a variety of interest rates on your deposit based on a specified period of time. The longer the time period, the higher the interest earned.

Money can be invested in a CD for a few months or for as long as ten years, but keep in mind that you will not have access to those funds until the CD “matures” (when the time period ends and the bank returns your money).

While a CD will typically not earn nearly as much as riskier options, your money will be safe and growing, buying you time to consider other long-term options.

Another conservative approach is to deposit your inheritance money in an interest-bearing account called a money market savings account.

Money market accounts will typically offer interest rates comparable to a traditional savings account, which will be lower than most CDs. But unlike a CD, you can withdraw funds without penalty, so the money could be used for an emergency if you need it. Money market accounts are usually insured by the FDIC as well.

While an MMSA likely offers the lowest return of your available options, it’s a safe place to park your inheritance, especially if you think you’ll need the money in the short-term.

This is one of the riskier options, but historically, it offers much higher returns than deposit accounts like a CD or MMSA. If you don’t already invest in stocks, there are a wide variety of institutions that offer brokerage services, many of them for low or no fees.

Buying individual stocks can be extremely risky, particularly for those new to the market. The good news is that there’s an easy way to invest in the market as a whole. Many exchange-traded funds (ETFs) and mutual funds specialize in replicating a market index like the S&P 500. So, when you buy a share of the fund, that money is instantly diversified across all of the stocks in that index.

The stock market can be intimidating if you’re inexperienced. Don’t be afraid to seek the help of a financial planner or other advisor if you don’t know where to begin.

Do you have children or grandchildren? If so, you might consider using your inheritance money to fund a college savings plan for them.

A 529 plan is a flexible, tax-advantaged account that can be used to pay any qualified education expense. This is a loving way to honor your lost loved one and invest in another family member’s future.

A financial planner can help you find the best investment plan based on the estimated tuition cost, the child’s age and other factors. Your risk will vary depending on the investment vehicles available in the 529 plan you pick.

Depending on the size of your inheritance, investing in real estate is another viable option. A house or other rental property will generate passive income, and if you buy in the right area, you could realize a big profit if home prices go up.

Working closely with a real estate agent who intimately knows the area and your financial goals is essential, however. As history has proven, investing in real estate can be pretty risky, especially if you’re not prepared.

Investing your inheritance money is not only a matter of where to put it and for how long. It’s also important to consider your personal financial situation, goals and immediate needs before making a decision.

Before investing, ask yourself these important questions:

• Are my debts paid off?
• Do I have an emergency fund to cover surprise expenses?
• Do I need to start saving for my kids’ college education?
• Do I have enough money saved for retirement?

Remember, you don’t have to go it alone. Having professional guidance can help you invest your inheritance wisely. There are plenty of financial planners, probate attorneys and wealth managers out there ready to advise you.

More From GOBankingRates

• 65 Splurges of the Filthy Rich
• Grant Cardone: Here's What You Should Do When Your Savings Reach $100K
• 3 Ways to Recession Proof Your Retirement
• 7 Money Secrets All Wealthy People Know -- And How You Can Use Them, Too

Holly Hammersmith contributed to the reporting for this article.