THE BLOG
12/10/2015 08:18 pm ET Updated Dec 10, 2016

5 Things to Do With an Unexpected Inheritance

Whether it comes from a generous friend, relative or outside source, an unexpected financial windfall can be a life-changing blessing...or a very tough money lesson.

A recent study from Ohio State University suggests that adults who inherit money are saving only about half of what they receive. The rest is spent, donated or lost. The study was based on data from participants in the National Longitudinal Survey of Youth 1979 who have been interviewed 23 times on various issues over the 36-year history of the survey. Ohio State researcher Jay Zagorsky reported that about 11 percent of the participants had received an inheritance with the median amount at $11,340.

Granted, putting that amount in a savings account with daily compounded interest at current rates around 2 percent wouldn't yield big gains - your balance would still be under $12,000 in 10 years. Not terribly impressive, but at least the principal would still be there. Taking on a bit more risk in the stock market can yield greater returns. Using a Bankrate.com historical returns calculator tied to the Standard & Poor's 500 Index, investing that original $11,340 from 2003 to 2013 - a period that included the 2008 market crash -- would have yielded a total balance (before investment costs, taxes or inflation) of $28,717.51.

It's proof that even small amounts of money can add up to a lot as long as the focus stays on making it grow.

Ohio State's Zagorsky offers this comment based on his survey results: "Maybe if you know in advance that most people spend half of their inheritances, you can prepare in advance and restrain yourself from spending that much."

With that in mind, here are some steps you might take to plan for a real or imagined windfall in the future:

1. Get a handle on your current finances. Why wait for an inheritance? In 2013, the Gallup organization reported that only 1 in 3 Americans actually prepared a written or computerized household budget. If you've never prepared a budget before, know that it is the traditional starting point for all personal finance decisions. Until you know how you're currently spending your money, you don't have a basis for making wise money decisions in the future. Don't wait to come into money to make one.

2. Start saving now. The long-term purpose of budgeting is to find and then save or invest money so you can plan for the future. Even if it is a few dollars a week as other resources go toward everyday expenses, get in the habit of regular savings and investment now. As indicated above, saving or investing a windfall can produce positive results over time. That goes the same for whatever you can save or invest every week. Consider activating direct deposit to build those amounts automatically. If an inheritance happens, you'll already have savings habits in place and account relationships set up to receive the money.

3. Line up qualified advice. Skilled financial or tax experts can help you review what you've done so far with your money and suggest ways to make your personal savings or investments work harder and go farther. Having this relationship in place before an expected - or unexpected - windfall is valuable because you'll already have experts in place who know your finances. If an inheritance happens, consider a certified financial planner, certified public accountant and an attorney involved in trust or estate matters for your financial team.

4. Think about relationships. Sudden financial gains can change people. This is why you see so many troubling news stories about people who have unexpected windfalls. The best approach to sudden money is to go quietly and immediately into the planning phase - don't make announcements and don't call friends or family members together unless there is an absolute need to do so with certain key individuals. Sudden money doesn't have to be public money and in most cases is best kept quiet.

5. Don't make big changes. If you're lucky enough to receive an inheritance of significant size, planning doesn't mean quitting your job, buying a car or moving out of your current place, at least not immediately. Big changes in finances require adjustment and a chance to learn how to manage that money going forward. Involving members of your financial team in this endeavor is advisable as you evaluate your options going forward. After any tax or estate issues are settled and money is free for use, extinguish debt first, build an appropriately sized emergency fund and then establish savings and investments that are appropriate for you and your family. Finally, keep an eye on all fees and taxes related to the future investments you'll make.

Finally, discuss with advisors how much you can spend on a vacation or a particular splurge once all the paperwork and planning is done. Try to keep the cost of that fun below 10 percent of the total inheritance amount.

Bottom line: If you've ever dreamed of a sudden inheritance, take one more step - plan for it. Getting your current finances under control can give you the proper training and preparation to handle sudden money events of all kinds.

Nathaniel Sillin directs Visa's financial education programs. To follow Practical Money Skills on Twitter: www.twitter.com/PracticalMoney