The Unexpected Pressure to Quickly Spend an Inheritance

Most Millennials would love a little extra cash right now.

As a generation, we’re currently experiencing some of the most demanding — and critical — years of our financial lives.

Some of us are still paying off student loans. Others are saving for a down payment or our kids’ college tuition. And we all would like to invest more for the future, specifically our retirement.

An inheritance often presents these opportunities. Yet, new research shows that we rarely use this money in the ways that we say we would. Author and Texas Tech professor Russell James writes:

“Forty-two percent of heirs had their net worth fall back to, or below, their pre-inheritance level when measured about 12 months later. …This propensity to immediately spend the entire inheritance is high. In fact, it’s higher than with any other type of financial windfall (when controlling for windfall size).”

Often, the most important inheritance advice involves waiting. Take a breath. Pause. Losing a loved one includes impossibly strong emotions. Which can impact how we think about this money in the first few days, weeks, and month.

This research tests this idea, though. Some people clearly don’t want to wait. Some people don’t want to hold onto this money. They would feel less pressure, less sadness, if it didn’t exist at all.

James notes:

“This behavior is exactly what we expect from experimental research. The death of a loved one triggers what researchers call mortality salience. Most people respond to that discomfort with avoidance. Psychologically, what we want is to avoid the death reminder. We want it to go away. And with inheritances, that’s often what happens. The death money goes away. Often it goes away very quickly.”

If this describes you, what’s the most prudent way to act? That may depend on what will alleviate your stress:

• Invest the inheritance: This may be enough, now that the money is out of your bank account
• Invest in tax-advantaged accounts: These accounts come with rules and limits, which will make those invested dollars feel even less accessible
• Open a new savings account: Investing the inheritance may not fit your circumstances and preferences. But your current day-to-day savings account may not solve in your problem in this situation, either. A new account or a new financial institution may do the trick.

Spending (some of) the money is not a bad thing. An inheritance should feel like a gift, particularly if that gift can honor a loved one’s memory. But try not to turn to spending simply for emotional relief. You have more choices than that.

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Recommended Money Reads for Millennials

If you liked this article, you may also want to check out:

• Millennials, Here’s What To Do With an Inheritance in 2026
• New Rules for Inherited IRA Distributions

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About the author: Kevin Mahoney, CFP®

Hi, I’m Kevin. I’m the founder of Illumint and a financial advisor in Washington, DC. I specialize in financial planning for Millennials like you. As a Millennial father and Certified Financial Planner™, I empower our peers to invest with confidence and flexibility. If you’re new to Illumint, I’m glad you’re here – you now have access to free personal finance tips written specifically for Millennials. I encourage you to read, watch, or listen to the ideas I share about exchanging your money for memories with your friends and family. And then when you’re ready, please send me your thoughts & questions!