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• Sarah Adams and her two children inherited $247,000 each from her aunt who died in 2015.
• She used her share to buy a house outright, purchase a car, and fund a solo trip to England.
• She put her children's shares in traditional savings accounts, and she wishes she had invested it.

I've always heard the adage that when someone comes into an unexpected windfall of money, "the poor spend it, the middle class save it, and the rich invest it." As I've navigated the process of inheriting money, I've concluded this is spot on, but it comes down to how each of those classes teaches (or fails to teach) their children financial competence.

I grew up with a "poor" mentality and knew I wanted to make better financial decisions for my future children. The only problem was I didn't know where to begin.

When my Aunt Bobbi, one of my closest confidants and biggest supporters, died unexpectedly in 2015, I still didn't know how to make sound financial decisions. I was 30 years old, had $45,000 in student loan debt, and rented a house with my (then) husband and two children. I was basically living paycheck to paycheck. I was also staring down the barrel of an impending divorce.

I knew she planned on leaving me some money (as she had no surviving children of her own), but I didn't realize how much I would be getting. I also never expected my children to be named in her will, either. When we inherited nearly $750,000 — around $247,000 each — I had no idea what to do with it.

What I did right

My initial instinct was to spend. I spent a little, but I took my time to think through the consequences of my spending.

I was in the middle of my divorce at this point, so my first step was to find out how much claim my soon-to-be ex-husband had on my inheritance. As residents of New York, the state's equitable distribution laws treat inheritances designated for one spouse as separate property. I was free to invest in a way I felt was most important at the time, which was to purchase a home.

Mortgage interest rates weren't terrible then, so I could've used just a portion of the money for a downpayment, but I also had an extremely limited employment history after staying home with my young children. That, coupled with my debt-to-income ratio, didn't feel like it would make me a strong candidate for traditional financing and was the main reason I decided to purchase a home outright with the majority of my share.

I also purchased a three-year-old Toyota for about $14,000. My most indulgent spending is also something I feel was a good choice: I took a solo trip to England. I don't regret that one bit.

What I did wrong

My children's inheritance wasn't set up in a traditional trust because my aunt didn't specify how the money would be given, so I was directed to my county's surrogate's court.

I had to apply to the court to become the guardian of their property. I also asked that my ex-husband waive his rights to be a guardian over their money, to which he agreed.

Once I was granted guardianship of the funds, I was given a piece of paper asking where I would like the funds deposited. This is where I went terribly wrong.

I directed the funds to separate savings accounts for my children at the local bank I had used for years. The court approved this and the money has been sitting in those accounts for nearly a decade, earning 0.01% interest annually, about $20 a year. The money is safe, and it's FDIC-insured, but I didn't realize that I was doing my kids a huge disservice.

When I was about to remarry a financially savvy guy in 2019 and we discussed finances, I admitted I wasn't the best with money. I didn't have much left in savings, I took out additional student loans for my master's degree, and I didn't have the slightest clue about investing.

My husband has taught me a lot about budgeting, from paying off and using credit cards responsibly, to handling household expenses better. The biggest lesson learned is that I really screwed up by not investing on behalf of my children.

Even if I didn't traditionally invest, online savings accounts now offer up to 5% interest. I went with what I thought was the safe, smart route to protecting the money by putting it in the bank, and I made a mistake.

I can't pull the money out and fix my mistake because the court won't let me

I can petition the court to withdraw the funds on behalf of my children for their "health, education, or well-being." I've done this a few times to help pay for braces, music lessons, and even therapy. The court doesn't have a problem with these things.

When I inquired about withdrawing funds to invest or even closing the savings accounts in favor of something more financially smart, I was rejected. It seems my opportunity to direct those funds was a one-time deal when I was first granted the guardianship.

My eldest can access his money in just under two years, and I plan to teach him to invest, not spend or save, as I've been taught to do. I'll do the same when my daughter gets older.

Hopefully, I'm setting both of my children up for a more successful start to their own financial journeys and my aunt would be proud of me for doing so. I still regret the uninformed choices I made along the way.

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