'I'm 17 and I just inherited $3.5 million.'

There's not much better than money with no strings attached.

While some of us are lucky enough to receive support from our family, there are actually some people who are even LUCKIER because they have a pretty penny set aside for them for when they reach a certain age. 

In saying that, it can be stressful to manage a lot of money for the first time, with no training on how to be financially responsible or any idea on how to make an inheritance last.

Watch: 5 money lessons your parents told you, that you should probably forget. Post continues below. 

Video via Mamamia.

That's what happened to one young woman who took to Quora, a question-and-answer website where people go to find information, to tell people she was finally about to turn 18... and getting access to a $3.5 million inheritance. 

She wanted to know if she could make that money last for the rest of her life (presumably without picking up a full-time job).

There were many answers from supposed experts and after falling into a hole, we decided to ask our own financial expert what they thought of the young woman's "dilemma". (Note: a problem we'd like to have!)

Frances Cook, a finance journalist, expert and founder of the Money Made Simple Masterclass, tells Mamamia that coming into so much money all at once can be a disaster waiting to happen. 


"This might seem like an easy problem to have, but it's actually quite an overwhelming situation," Cook says. 

"We've all heard of how many lottery winners can end up in a worse financial situation than they were in before the win. That's because a big lump sum dropping out of the sky does a funny thing to our brains – we get overwhelmed, and more often than not, we blow it."

It's the exact same situation for inheritances, which can also be compounded by grief, guilt and shame, depending on the circumstances of that money landing in our bank accounts. 

"It's a problem many people would love to have, sure," notes Cook. "But it's still a situation that needs careful handling."

Here's exactly what Cook would do to make that money last, in two very simple steps. 

1. Hit pause for a year. 

As a first priority, "Give yourself time to process and work out what's happening," says Cook, who advises 12 months to just let your new reality sink in.

"Think about your new situation, what brings happiness into your life, what doesn't, and what you'd like your priorities to be." 

This could mean figuring out if you want to study, travel or work in a field you're passionate about. Also, she says, hit up the pros. 

"You probably do want to consider a financial adviser to help you, when you're this young and have a lump sum this large," she explains. But there can be sharks anywhere, and taking a beat to breathe and learn more, will help you arm yourself with the knowledge to know what you want from the people on your team."


2. While you're doing that, learn about money. 

Cook notes that there is plenty of useful information out there available, including podcasts, books, articles and even accounts on Instagram dedicated to providing helpful financial advice.

"Knowledge brings confidence and will help you have conversations with any professionals that you decide to work with, who can manage your money," she says.

Listen to What The Finance, a money podcast by Mamamia. Post continues after audio. 

But for those asking for a quick answer on whether it is possible to live off of $3.5 million forever? The answer is "absolutely", Cook says.

"If you invest the money into something like a share market index fund, you’ll be invested in lots of companies that are earning money, and share some of the profits with you," she explains, adding that investing into only one company can be very risky.

"But an index fund invests into hundreds at once, and is far less risky, and makes the investment process quite easy.

"While you're listening to podcasts and books, make sure they include some material on index funds so that you understand how they work. They're a simple, lazy way to invest, and make a lot of money for the average person."

Cook adds that the standard rule of thumb for those wanting to invest so their nest egg lasts forever is to take out no more than four per cent per year.

"The share market, on average, makes much more than that – an average of seven per cent per year, once you've included inflation, taxes and fees. But taking out four per cent per year means you leave a little in there to keep growing your wealth so that you hopefully never have to go back to work."


To put it into context, Cook says four per cent of $3.5 million means you will be making at least $140,000 per year.

"You might not want to never work again, but this certainly gives you that option. You could work part-time, at something you truly enjoy, for life satisfaction and social life," the financial expert adds.

"You could decide to do volunteer work. You might want to take off for a while and travel. You have options now, so take the time to think about what matters to you."

That's all well and good – but what about those who haven't had a mighty millions-of-dollars inheritance just fall into their lap? 

Cook says we can still employ any of the same tips and practices. 

"The share market is really powerful, and any amount of money coming your way that doesn’t rely on a job gives you more stability in the world," she explains. 

"We might not all be able to create $140,000 a year of passive income, but anything that we can invest creates a life where we have more options and freedom."

Frances Cook is a finance journalist, expert and educator. She is the founder of the course Money Made Simple, which explains everything from money mindset and mastering debt to learning to invest, and can be found on her website here.

Feature Image: Getty.

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