Savvy Banking: How should I invest a gift of cash?

In this nwaMotherlode segment, Savvy Banking, you’ll find the answers to a variety of pressing money questions submitted by Northwest Arkansas moms.

This month’s question is:

My parents have given us a large gift of cash after selling some assets. What’s the best way to invest $10k other than a regular savings account?

Don Paul, an investment executive with First National Investment Services, offers some good advice here:

It all depends on how the rest of your finances are structured.

Do you have credit card debt?

For example, if you have debt, especially in the form of credit cards with high interest rates, my recommendation would be to pay it off first.

In our current interest rate environment there is no product that will pay a higher interest rate than what the credit card is charging. Or perhaps you have a medical bill or some other form of consumer debt that could be completely paid off with this gift- wipe it out before you considering investing.

Emergency Savings Account

After your credit card debt has been handled, I would then recommend an Emergency Savings account.

This would be a typical bank Money Market or Savings account for storing money that you would need in the event of an emergency. An emergency would NOT be a down payment on a new car or booking an elaborate vacation.

A true emergency would be automobile problems, a washer or dryer going out, medical issues that need immediate attention, etc.  An Emergency Savings Account is money that is ready and available to handle these issues, without going into debt. A good base for this account would be somewhere between $2,000 and $3,000.

Investment Options

After these two issues have been properly satisfied then a very conservative mutual fund that pays monthly or quarterly dividends would be a great starting point. Mutual funds can be purchased through a local Investment Advisor and can be very good investments for the long haul.

Money can be added to a mutual fund or even withdrawn if needed. It can be added on an automatic system monthly or even random deposits at your convenience. My recommendation would be to meet with an Investment Advisor and talk over the many options before making a final decision.

Don Paul is an investment executive for First National Investment Services. He has been working with individuals and families in the areas of financial services for over 23 years specializing in Financial and Retirement Planning. Don is a graduate of the University of Arkansas and is the father to three boys. He and his wife Terri live in Fayetteville.

The fine print: Arkansas Insurance Producer License #32555 located at 3706 Pinnacle Hills Pkwy, Rogers, AR 72757. Securities and Insurance Products offered through Cetera Investment Services LLC, member FINRA/SIPC.

Advisory services are officered through Cetera Investment Advisors LLC. Neither Cetera Investment Services nor Cetera Investment Advisors is affiliated with the financial institution where investment services are offered. Investments are: Not FDIC Insured · No bank guarantee · May lose value · Not a deposit · Not insured by any federal government agency