Finder maintains full editorial independence to ensure for our readers a fair assessment of the products, brands, and services we write about. That independence helps us maintain our reader's trust, which is what keeps you coming back to our site. We uphold a rigorous editorial process that ensures what we write and publish is fair, accurate, and trustworthy — and not influenced by how we make money.
We're committed to empowering our readers to make sound and often unfamiliar financial decisions.
We break down and digest information information about a topic, product, brand or service to help our readers find what they're looking for — whether that's saving money, getting better rewards or simply learning something new — and cover any questions you might not have even thought of yet. We do this by leading with empathy, leaning on plain and conversational language that speaks directly, without speaking down.
If you receive a large sum of money, often called a windfall, your first thought is probably along the lines of: “OK, now what do I do with it?”
Good on you for taking a second to make a plan — it’d be a shame to squander a large sum of money. After you’ve determined what is yours to keep after taxes, here are six things you could do with a windfall.
1. Put it in a high-yield savings account
One of the better places to put a large lump sum of money is a high-yield savings account. High-yield savings accounts have higher interest rates than average, often as high as 5% APY. These deposit accounts can grow your balance without any work thanks to the power of compound interest.
However, if your lump sum is over $250,000, be careful placing it all in one deposit account. Most deposit accounts are only insured by FDIC or NCUA insurance up to $250,000. If your windfall is larger than that, you can either spread the amount across multiple accounts or put it in a deposit account with higher insurance. For example, SoFi® Checking and Savings account offers FDIC insurance up to $3 million.
If you have any consumer debt, like credit card balances, personal loans, payday loans or anything similar, using your windfall to pay it down is a great idea. American credit card holders report owing an average of $3,929 in credit card debt, according to the Finder Consumer Confidence Index.
Unsecured debt is notoriously hard to pay down, and with its high interest rates, it can be very costly if you don’t pay it off quickly. The only thing to watch for are possible prepayment penalties, which is a fee charged if you pay off your loan faster than planned, but those aren’t typical with credit cards.
3. Invest it
One of the most common suggestions (and a great one) is to invest large sums of money outside of your typical income. With a large sum of cash that isn’t included in your everyday budget, investing in retirement is a wise use.
Some investing or retirement planning options include:
Do you have plans to buy a house? Want to pay off your student loans? Looking to start a business? Were you working on a “Financial Independence Retire Early” (FIRE) plan? With a large sum of cash, you can accelerate those plans.
5. Create an emergency fund
If you don’t have an emergency fund or it’s not exactly bursting at the seams, using your windfall to bolster it is a good plan. Emergency funds can help out in case of medical emergencies, car troubles, job loss or anything else that could happen outside your normal monthly budget.
The size of your emergency fund depends on your monthly expenses. Most agree that an emergency fund should have at least three to six months of living expenses, including loan payments, housing, groceries, utilities, insurance and so on.
For even more savings, you can also place your emergency fund in a savings account to earn interest.
6. Save for your family’s future
If you have kids, saving a sudden large sum of money for their education, first car or a wedding can be a great use of that cash.
There are investment accounts for kids, such as 529 savings plans designed to save for education expenses. There are also teen-owned brokerage accounts, UGMA and UTMA accounts and custodial IRAs. No matter which option you choose, be sure to factor in taxes and when the funds are released to them. In most cases, investment accounts for kids give parents or guardians full control and responsibility over the account until the child reaches the age of maturity, usually 18.
Bottom line
Whether you got this lump sum from an inheritance or lottery, it’s nice to have money that’s outside your typical earnings. If you’re still not sure what to do with your windfall, it may be a good idea to talk to a financial advisor.
While you’re deciding what to do with your new lump sum of cash, at the very least, consider putting it in a compounding account so it can continue to grow.
Bethany Hickey is the banking editor and personal finance expert at Finder, specializing in banking, lending, insurance, and crypto.
Bethany’s expertise in personal finance has garnered recognition from esteemed media outlets, such as Nasdaq, MSN, Yahoo Finance, GOBankingRates, SuperMoney, AOL and Newsweek. Her articles offer practical financial strategies to Americans, empowering them to make decisions that meet their financial goals. Her past work includes articles on generational spending and saving habits, lending, budgeting and managing debt.
Before joining Finder, she was a content manager where she wrote hundreds of articles and news pieces on auto financing and credit repair for CarsDirect, Auto Credit Express and The Car Connection, among others.
Bethany holds a BA in English from the University of Michigan-Flint, and was poetry editor for the university’s Qua Literary and Fine Arts Magazine. See full bio
Bethany's expertise
Bethany has written 441 Finder guides across topics including:
Cardless cash provides a convenient way to use an ATM without their card. If you often go out without your wallet, or want to make it easier for family members to take out money, this is a feature that deserves a second look.
Advertiser disclosure
Finder.com is an independent comparison platform and information service that aims to provide you with the tools you need to make better decisions. While we are independent, the offers that appear on this site are from companies from which Finder receives compensation. We may receive compensation from our partners for placement of their products or services. We may also receive compensation if you click on certain links posted on our site. While compensation arrangements may affect the order, position or placement of product information, it doesn't influence our assessment of those products. Please don't interpret the order in which products appear on our Site as any endorsement or recommendation from us. Finder compares a wide range of products, providers and services but we don't provide information on all available products, providers or services. Please appreciate that there may be other options available to you than the products, providers or services covered by our service.
We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.
How likely would you be to recommend Finder to a friend or colleague?
0
1
2
3
4
5
6
7
8
9
10
Very UnlikelyExtremely Likely
Required
Thank you for your feedback.
Our goal is to create the best possible product, and your thoughts, ideas and suggestions play a major role in helping us identify opportunities to improve.
