My Parents Gifted Me $25,000. What Should I Do With It?
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As always, The Motley Fool cannot and does not vide personalized or financial advice. This information is for informational and educational purposes only and is not a substitute for fessional...
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5 min read
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real estate
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July 3, 2025
08:35 AM
The Motley Fool
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As always, The Motley Fool cannot and does not vide personalized or financial advice
This information is for informational and educational purposes only and is not a substitute for fessional financial advice
Always seek the guidance of a qualified financial advisor for any questions regarding your personal financial situation
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It's not easy to make money, and we often seem to need more of it to reach our goals or, sometimes, even just to pay the rent
Some of us therefore bably daydream receiving a windfall sum, and how it could solve lots of blems
Image source: Getty Images
Here's a look at a question posed by someone on Reddit, asking how to best deploy $25,000
I'll answer that question in broad terms -- to help anyone who has received or might receive a large cash infusion
Parents are gifting me $25,000byu/SnooPies6812 inpersonalfinance Be sure to have an emergency fund The questioner doesn't offer much information their financial condition, so we don't know if they have an emergency fund
If they don't, that $25,000 will come in very handy as it can fund one
An emergency fund should have enough accessible money to support you for at least three months, if not longer
Let's assume that the questioner spends $4,000 per month on housing, food, utilities, taxes, transportation, and other non-negotiables
So a three-month emergency fund would mean socking away $12,000
If they want to be more conservative, they might sock away more
That money should be in a safe place, such as a savings account, a money market account, or a certificate of deposit (CD)
Think how much money you need to pay all your bills and expenses each month, and have a sufficient emergency fund for that
Remember that unexpected job losses happen, and costly health setbacks happen, too
Don't be unable to handle them
Get out of high interest rate debt We don't know whether the questioner on Reddit has any debt, but if they are burdened with any high interest rate debt such as that from credit cards, it's critical to get out of that debt
Know that the average credit card interest rate was recently 25. 37%, per Forbes Advisor
If you owe, say, $50,000 and you're being charged 25%, you're looking at paying around $12,500 per year -- interest
So if the Reddit questioner -- or you -- has any such debt, it's a savvy move to pay it off with some or all of your cash windfall
Sock it away until you know more and have a good plan Once you have an emergency fund and no high interest rate debt, you can think the money
But it's best to read up on first, so that you're comfortable with what you're doing
You can learn a lot at Fool
Com, of course, and also in books such as The Motley Fool Investment Guide: Third Edition by David and Tom Gardner, The Little Book That Still Beats the Market by Joel Greenblatt, The Little Book of Common Sense by John C
Bogle, and The Little Book That Builds Wealth by Pat Dorsey
As you devise your plan for your windfall money, think in terms of time and how far out your various goals are
If you're planning to buy a within five years, it's good to keep money d for that out of stocks, as the stock market can be volatile
High-yield savings accounts can be a good option
Money you're saving for retirement, assuming it's a decade or two or more away, may grow fastest in stocks
For stock market, one excellent strategy is to make it easy on yourself and stick with exchange-traded funds (ETFs)
There are many good index ETFs, such as the classic Vanguard S&P 500 ETF
There are also lots of great dividend-focused ETFs, some yielding 3% or more and offering recent double-digit average annual gains
Here's how the questioner's money -- or your money -- could grow if it averages annual gains of 8%
For context, know that the S&P 500 has averaged annual returns close to 10% (ignoring inflation) over long periods
Growing at 8% for $7,500 invested annually $15,000 invested annually 5 years $47,519 $95,039 10 years $117,341 $234,682 15 years $219,932 $439,864 20 years $370,672 $741,344 25 years $592,158 $1,184,316 30 years $917,594 $1,835,188 35 years $1,395,766 $2,791,532 40 years $2,098,358 $4,196,716 Data source: Calculations by author
Unless we're financially independent, each of us needs to be saving and for our future needs -- and, ideally, making good use of tax-advantaged retirement accounts such as IRAs and 401(k)s
Be sure to do so, whether you're a lump-sum windfall or, most people, you're socking money away every month or few months
Selena Maranjian has no position in any of the stocks mentioned
The Motley Fool has positions in and recommends Vanguard S&P 500 ETF
The Motley Fool has a disclosure policy.
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