“If I say the sky is blue, you'll tell me it's green”: My 19-year-old daughter will inherit $800,000. How can she invest in her future?

I know she wants to keep some money to live on for the next year or two, but other than that she has no concrete plans.

My mother is concerned

Related: I asked my elderly father to leave his house so I could refinance it – and get a $200,000 annual stipend for me and my sister. Is this a good idea?

Dear concerned,

That's a lot of money. She should – and should not – change her life. Let me explain.

If your daughter can buy a property for $300,000 when she gets her first job, and pay off a $100,000 mortgage — or even better, live mortgage-free with just property taxes and maintenance costs — that would be a great first step toward financial independence. .

She will be the envy of her peer group (more on that later). Most people work for years to free themselves from the rental trap and get their foot on the property ladder. The value of her home will likely rise, freeing her up financially to enjoy her life.

With the help of an advisor, who is also a fiduciary, she can plan her education and use this windfall as a way to not only spend, but learn how even $800,000 comes with limitations. Budgeting and planning can be a lot of fun, and it can also help her avoid getting into debt.

This is not the time to invest in cars, clothes, and vacations: Not only will such purchases drain your bank account faster than you imagine, but they could lead to lifelong bad habits — especially if one month of lavish spending habits turns into 10 years.

It's also not a good idea for her to use that money in ways that separate her from her peer group. Boasting this inheritance will only sow resentment and jealousy among her friends and acquaintances, and start years of conversations that begin with “It's all right for you.”

Few people want to be friends with someone who flaunts his wealth, congratulates himself on what he's done, and assumes that others are living the lifestyle they are used to. Uncontrolled spending can drain empathy as well as bank accounts.

Yes, free time is important; We're here to enjoy life, after all. With professional advice, she can allocate income to activities such as travel, tennis or ski lessons – activities that will add to her quality of life and allow her to enjoy modest pleasures with her friends rather than living a five-star lifestyle.

You should feel empowered, excited rather than fearful, with professional advice. Planning a future with a lot of money at her disposal must be more exciting than planning a college graduation or a birthday party. the prize? Financial independence and peace of mind.

Stocks, CDs, and Roth IRAs

Yields on CDs have increased in the past couple of years, and rates currently range between 4% as well as the range of three- to seven-year jumbo CDs that require a minimum deposit of $100,000. That's not a bad rate of return, if she wouldn't touch it.

A certificate of deposit is essentially a limited-term savings account — and the interest you earn on your CD must be reported as taxable income to the Internal Revenue Service, unless the money is stored in a tax-advantaged account like an IRA CD.

She could invest $50,000 in the stock market, preferably in stocks of companies with higher return on equity, lower leverage, and more consistent profit profiles. This can help her learn how to double down — and make money on her initial investment and ROI.

Avoid individual stocks and choose a mutual fund or exchange-traded fund. Research suggests that young people become more risk averse and lacking in confidence as the years go by, but remember that investors tend to respond to negative events more strongly than to positive ones.

This is an ideal time to take advantage of her relatively low income, especially when she starts working, and make contributions to a Roth IRA, which are typically made with after-tax dollars. A savings gift for retirement could be worth much more than $800,000.

The sad truth is that there is no magic $800,000 strategy that will make your daughter happy or free her from worries for the rest of her life. She will still have to study hard, work for the career she wants, and fight for her place in the world like everyone else. However, this money is a great start.

And when she begins her career in earnest, hopefully she will have given herself more options to choose a job she loves — one that will reward her fairly and generously, allowing her to contribute to her 401(k) with an employer match.

Because many young people grew up during the Great Recession and saw what their parents went through, they may be more cautious and risk-averse in investing; But the earlier you start, the more time you'll have to put up with all those slings and arrows.

The slow and steady approach is a win-win: $800,000 + time = happy outcome.

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

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Previous columns by Quentin Fottrell:

“I don't like the idea of ​​dying alone”: I'm 54, twice divorced and have $2.3 million. My girlfriend wants to get married. How do I protect myself?

My partner is against marriage. I'm not on the title to his house, but he set up a revocable trust in case he died first. Is this too risky?

I want my son to inherit my house worth $1.2 million. Do I leave it to my second husband in my will? He promised to pass it on.