Helen: I am 22 and at university studying dentistry, and will graduate in three years.
I am confident about getting a secure job with a good income (the average for Aussie graduate dentists is around $90,000 a year,
I was told) when I graduate.
I am living off my income of $400 a fortnight, plus Centrelink youth allowance payments of $300 a fortnight.
I cannot earn more than this as I do 42 hours a week of face-to-face lessons plus studying on top.
I have just been told I will receive a $250,000-$300,000 inheritance in the next couple of months and I don’t know what to do with it!
As I am young I have no responsibilities as such and want to use the inheritance money to make more for my future. But I don’t want to put all of it at risk and don’t know how much I should risk.
I will need some to live off as I will be cut off from Centrelink payments but am just not sure of the best options for me.
Paul: Goodness, Helen, that is a lot of money to land on you at 22, but it is a nice problem!
A couple of months is not far away, so the first thing I want you to do is to put a sensible amount of the inheritance into your day-to-day account to meet your living costs without income and youth allowance for, say, six months.
An interesting debate you should have with yourself is whether to allow exactly what you have now, or give yourself a little pay rise. You are obviously intelligent to be studying dentistry but, smart or not, we are all human.
It is just really easy to spend more without even noticing it. So while you might want to give yourself a bit of a cash reserve for a holiday or similar, my advice is to keep up your financial discipline. Put aside as much of
the money as you can.
I’d put the balance after your six months’ living allowance straight into a six-month term deposit with your bank. Sure, you will only get 2.7% or so but it is safe.
Even 2.7% on, say, $250,000 is close to $4000 over six months. After six months you may even roll over for another six months to allow you to think more about
the money over your Christmas university break.
In the longer term, I see this money as a deposit on an investment property or your future home, so I feel it is wise to keep it secure. Your career will be far more valuable than this money, so that should be your main focus for the next few years. Also, I do agree with the many experts, backed by market evidence, who feel that this property boom cycle in many of our cities is slowing, so a panic to buy is neither healthy for you nor necessary.
Right now I think planning your spending and protecting this money is the way to go.