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Managing a Financial Windfall in Your 20s: What to Do

Mattea Roach still gets around Toronto by subway. In a city where tear-down bungalows can sell for $1 million, Mx. Roach, who uses they/them pronouns, still shares an apartment with their brother despite having more than enough money to buy a house.

For Mx. Roach, 24, the youngest ever “Jeopardy” super-champion, the $560,983 in winnings has done little to change how they live their daily life. They haven’t bought a car or splurged on anything more than some new clothes and a few more trips to the record store.

Despite the popular fantasy that a sudden financial windfall — whether a game-show win, an inheritance or a lawsuit settlement — will radically change a young person’s life, it’s not a guarantee. It does, of course, for some, allowing them to buy a house or adventure around the world at a young age. But for those who receive money after losing a loved one or who are learning to manage large sums of money for the first time, a windfall can feel overwhelming.

Mx. Roach, who grew up in Halifax, Nova Scotia, had planned to attend law school, but is doing public speaking and podcasting for now. “School’s not going anywhere, and these other things won’t be around forever,” they said. “I once had a very good idea what I was going to do with my life.”

Now, perhaps surprisingly, Mx. Roach has less clarity than before their win. “There’s a sense of uncertainty and unease,” they said. “I have it more than ever.”

For Mx. Roach, the “Jeopardy” money offers a sort of relieved exhalation, the knowledge of having a cushion to make new, different and possibly more interesting choices with their life.

“I feel very much the same as I did before,” they said. “I always feel guilty spending money.” Having six figures in the bank, though, offers them a welcome safety net in case they ever get sick, become unable to work or need to help their mother. Mx. Roach’s father died unexpectedly when they were competing on the show.

“I don’t know yet what my lifestyle will be,” they said.

For Alexandra Merullo Steffgen, a 25-year-old writer in Fort Collins, Colo., a $10,000 fellowship changed her life for good. She was a scholarship student during her final two years at Phillips Exeter Academy, a prestigious preparatory school, with peers who were wealthy enough to fly to Europe on a private plane for a weekend and who had campus buildings named for family members.

“A lot of time I couldn’t keep up with my friends who had stipends,” Ms. Merullo Steffgen said. “I had a minimum-wage job two days a week at the library.”

She watched fellow seniors worry about which college they would get into and knew that wasn’t the path she wanted. She instead applied for two fellowships, each of which would give her the financial freedom to take a gap year and travel. At 18, she won a Phillips Exeter Academy fellowship worth $10,000 that allowed her to do just that.

“It was so exciting,” Ms. Merullo Steffgen said. “It was a sum of money I could barely fathom at that age. It felt really special.” She volunteered in Naples, Italy; hiked the Camino de Compostela in Spain; spent time in Berlin, Ireland and Florence, Italy; and went on a Buddhist retreat. She spent the last of her funds on a trip to Cambodia.

“I spent the money just indulging myself, which I don’t do anymore,” she said. “I let myself enjoy myself more than any other time. I’ve always felt like an overly responsible person making sure no one suffers because of me. That was the greatest gift it gave me.”

The irony to getting a windfall in your 20s or 30s? It can offer new freedom, but it can also feel disorienting, especially if your peers are still in early-stage careers, burdened by student debt and simply can’t relate to the sudden challenge of managing five or six figures.

Nicholas Freda, a tech worker in Seattle, was 26 when he received a $100,000 inheritance from his grandmother. The gift brought pangs of grief because his father had already died, which meant the money would be passed directly to him.

“I’d heard people talk about inheritance in old-timey movies,” Mr. Freda said. “It was something other people did.” When he was told to expect a payment, “I thought it would not be very much at all,” he said.

Mr. Freda said he was initially uncomfortable with the inheritance. He ultimately decided the money should go toward buying a house rather than unnecessary splurges and went in search of advice. He was surrounded by older and much higher-earning workers in his industry who owned multimillion-dollar homes.

“It was hard to discuss since we weren’t really using the same unit of measurement,” Mr. Freda said of the differences in buying power.

Yet it was also an odd feeling, he said, to be able to “have a conversation with people five, 10 or 15 years further along” in their careers. Two years after receiving the money, Mr. Freda put two-thirds of his inheritance into buying a house, where he now lives with his fiancée.

Gina Knox, a 30-year-old financial coach in San Antonio, has received two windfalls at an early age: $15,000 at the age of 22 and $100,000 at 28. The first was money from her parents left in her college account after graduation, which came as a shock.

Ms. Knox took $5,000 and traveled for a month through South America, riding horses in Argentina, savoring hot springs in Chile and taking a bus ride over the Andes. “I had a blast,” she said.

But she was stymied by what to do with the rest of it. “I sat on it for months not knowing what to do,” she said. “I was completely petrified I would mess it up or spend it.” She felt awkward and overwhelmed thinking, “this is too much money to have.”

By the time Ms. Knox received a $100,000 family inheritance, she had more confidence thanks to her father, who taught her about money management. “I had already saved and invested $100,000 on my own, so this was not the first time I’d managed six figures,” she said.

Ms. Knox now counsels others about managing their money. “If you don’t know what to do with it, it is vitally important to do nothing,” she said. “Ask a family member or financial adviser when you have large sums of money you are strategically or emotionally not prepared to deal with. Spend some time imagining what you want your life to be.”

Her splurge is driving a Mercedes station wagon, a purchase that gives her daily pleasure.

Those from lower-income families are even less equipped to smoothly integrate a windfall into their lives because managing large sums of money is a new skill they need to master. Steven M. Hughes, 36, a financial therapist based in Atlanta, is a first-generation American and knows the welter of emotions a sudden influx of cash can evoke. Fear, shame and guilt are three common ones he encounters with his clients.

“There are a lot of emotions tied into money, and there’s a rush of endorphins with an inheritance, but you may also feel a survivor’s remorse having more money than your family or your neighborhood ever had,” he said.

A windfall can also attract new pleas for aid. “You may now feel like a faucet for your family,” Mr. Hughes said.

Your first phone call should be to “the person you admire most in how they manage their money,” he said. “Ask who’s their accountant.” Your second phone call should be to a fee-based financial planner. “Once you have those people on your team, you can get some ideas from them,” he said.

If family or friends come asking for money, Mr. Hughes suggests giving yourself some guardrails. “Sometimes our heart and our eyes are bigger than our wallets,” he said. Lower-income recipients and people of color are often already financially supporting both younger and older relatives at the same time and can be seen as the savior, or the financial anchor of the family.

“Establish yourself financially first,” Mr. Hughes said.

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