From windfall to wealth: how to make your money last

Receiving a financial windfall can provide an opportunity to advance major financial objectives and responsibilities. However, without a well-defined plan, such sudden wealth may quickly become an unwise expenditure. With more young individuals concentrating on achieving financial independence and building lasting wealth, experts urge young adults to view a financial windfall not as funds to spend, but as a basis for future financial security.

Akweley Laryea, Head of Retail Banking at First National Bank, explains that one of the most common errors young adults make is to view a windfall as an opportunity to instantly enhance their lifestyle. She warns that while a financial windfall may seem to make goals like homeownership, purchasing a new vehicle, or traveling the world achievable immediately, it is crucial to first establish your financial goals.

Decisions made during the initial months can have a substantial impact on long-term financial wellbeing, she adds.

To consider when handling a financial windfall, Laryea advises against making significant financial decisions immediately. Instead, take the time to create a structured financial plan that addresses both short-term and long-term needs, thereby preventing unnecessary spending. Seek professional advice, and refrain from making substantial financial commitments for at least six to twelve months after receiving the windfall.

This period allows for the acquisition of full understanding of financial needs and the making of decisions that support long-term wealth creation rather than short-term gratification. Setting clear financial goals is essential, as a windfall can present significant opportunities. Young adults should prioritize reducing costly debt, building an emergency fund, and investing for long-term growth.

It is also advisable to avoid rushing into business ventures or investment opportunities. Instead, take the time to understand these opportunities thoroughly and seek appropriate advice before allocating funds.

Young people should also be cautious not to resign from their jobs, viewing the windfall as a replacement for employment or career growth. A financial windfall should complement, not replace, career ambitions. Continuously working, acquiring new skills, and increasing earning potential remains one of the most effective methods to preserve and grow wealth over time.

Financial windfalls don't always come through inheritances or prize winnings. In recent years, families are seeking meaningful ways to transfer wealth and create financial opportunities for loved ones during crucial milestones. Innovative solutions like the FNB Investment Gift Card are transforming the way people think about gifting.

Instead of providing cash that may be quickly spent, families and friends can gift an investment that enables the recipient to commence or expand their wealth journey. By transitioning from consumption-based gifting to investment-based gifting, families can actively contribute to fostering a stronger culture of saving and investing across generations.

Laryea emphasizes that families should proactively prepare younger beneficiaries for future inheritances. It is often overlooked how significant the obligations are that accompany inheriting money. Where possible, families should initiate conversations early and assist younger beneficiaries in understanding the financial responsibilities that may arise when managing substantial sums of money.

"Receiving a financial windfall is rare," Laryea concludes. "For young people, it can be a potent opportunity to build wealth, attain financial freedom, and establish a more robust financial future, provided it is managed with patience, discipline, and the appropriate support."