Learn How Investing Works

Featured Article, Finance, Home & Family, People
on March 12, 2012

Dave Ramsey is a money-management expert, national radio personality and best-selling author.

Dear Dave,
I’m 21 and currently in college. Next month I’ll be receiving an inheritance of about $40,000. I don’t know anything about stocks, mutual funds or investing in general, but I don’t want to lose all this money. I don’t have any debt, and scholarships pay for my school. So what should I do?
—Jessie via email

Dave Says: I’m glad you’re asking questions. One of the fastest ways to lose money is to put it into something when you don’t know how the investment works. You don’t need to change your major to finance to make this happen, but you do have a $40,000 responsibility that you didn’t have before. For now, a simple savings account is fine. I’d park $30,000 in there and just forget about it for a while. Then use $5,000 to set up an emergency fund, and blow $5,000 on some things just for you. After all, spending and having fun with money is one of the things it’s good for!

But here’s something to think about once you’ve educated yourself on investing, Jessie: If you put that remaining $30,000 in a good growth stock mutual fund, by the time you’re ready for retirement, you’ll be looking at millions. Talk about being able to retire with dignity and change your family tree!