Pay Dirt is Slate’s money advice column. Have a question? Send it to Kristin and Ilyce here. (It’s anonymous!)

Dear Pay Dirt,

When I was 22, my grandmother died. She was my favorite person. She didn’t have a lot of money, but each of us grandchildren got a check for $3,000 from the will. I really, really wanted to do something special with that money, something to honor my grandmother, but I was young and dumb and broke, and it evaporated into rent and burritos and drinks and cigarettes and all the other “necessities” of my young, dumb 22-year-old life. I have had an “IOU” to myself for that money ever since and promised myself that one day, when I had an “extra” $3,000, that would be “grandma’s money,” and I’d do something special with it.

Well, it took another 10 years, but I have grandma’s money now, or I will. I did a freelance project for a friend, and after taxes, I’ll have just over $3,000 from that check—extra money that isn’t earmarked to go anywhere. (I budget and am responsible with money now, mostly.) I’ve thought a lot about this money, and how I want to honor my grandma with it, and I’d like to use it to help me be more self-sufficient as I get older.

I do have a 401(k) through work, and I know I’m behind where I should be on that, but I’m putting in 6 percent per check now, and feel good about that. So part of me thinks I should put it there. But that doesn’t seem symbolic enough to me, it feels like $3,000 will just be swallowed up. I want this money to start something, if that makes sense. I’m single and don’t plan to have children. Is there another kind of account that you would suggest?

—Good Granddaughter, Finally

Dear Good Granddaughter,

Your grandmother would be so proud of you. Not because of the $3,000—because you kept your promise to your future self and you worked hard to get your finances into shape in order to do it. And you’re right: dumping this $3,000 into your 401(k) isn’t the move here. Not because it’s bad financially, but because it doesn’t match the intention. You want this money to mean something, to have its own identity. I love that.

So, open up a Roth IRA. This will be Grandma’s account.

A Roth IRA is perfect for what you’re describing. You fund it with after-tax money (which this is), it grows tax-free, and you’ll never pay taxes on withdrawals in retirement. It’s the account that rewards patience—which feels pretty appropriate for a promise you kept for a decade. At 32 with no children, $3,000 invested in a low-cost index fund inside a Roth has roughly 30+ years to grow. Historically, that could turn into $25,000 to $30,000 by the time you retire. Your grandmother’s $3,000 becoming a meaningful chunk of your retirement? That’s a legacy.

Open it at Vanguard, Fidelity, or Schwab—all three offer Roth IRAs with no account fees and no minimums to open (Vanguard charges a $20 annual fee unless you go paperless). Pick a target-date retirement fund if you want simplicity, or a total stock market index fund if you want to keep it clean and classic. Fund expense ratios range from literally 0 percent at Fidelity to around 0.07 percent at Vanguard—negligible either way. Set it and forget it.

Here’s the symbolic part you’re looking for: Every year on your grandmother’s birthday, log in and check on it. Watch her gift grow. And if you ever have another good freelance year, or find yourself with extra cash from a bonus or raise, throw a little more in. The Roth IRA limit is currently $7,000 annually—plenty of room to keep building Grandma’s account over time. When you retire, you’ll appreciate a tax-free cash option. And, if you do decide to buy a house someday, you can tap the contributions for a down payment.

She gave you $3,000. Grandma’s account will help you fund a future she’d be proud of.

Please keep questions short (<150 words), and don‘t submit the same question to multiple columns. We are unable to edit or remove questions after publication. Use pseudonyms to maintain anonymity. Your submission may be used in other Slate advice columns and may be edited for publication.

Dear Pay Dirt,

My company’s health insurance includes a Health Savings Account (HSA) option, which I’ve been enrolled in for several years. Since I have no significant medical issues and typically only go to the doctors for preventive care annually, this has been a great way for me to build up savings. If anything, I’m annoyed I didn’t opt for our HSA option sooner. My company contributes $1,000 a year to my account, and I’ve contributed as well. So I now have over $11,000 stocked up, which feels incredible.

I’ve been saving intentionally, knowing I would plan to get pregnant soon enough, and now I am pregnant now, due in August. So far, this pregnancy is progressing normally and is low risk, but I also know “anything can happen,” so I feel better having this money saved and on hand in case of any impending medical issues with delivery and my child.

That being said, I also have the opportunity to invest HSA funds. From what I’ve gathered, it seems similar to how my 401(k) is invested (safe, long-term decisions). I have the option to do Managed (model matched to my risk profile and age) versus Brokerage (S&P 500 Index stocks and ETFs). With so much money saved, it seems silly not to invest it. But my gut says I should wait until after my child’s birth, just so I have that full amount on hand in case of a medical emergency. I can withdraw my investments if needed, but if the market was poor at the time of my child’s birth, I don’t want to have significantly less money available.

Looking ahead to investing once the baby is here, how much is a good amount (like would you advise investing X percent of an HSA), and should I do managed or brokerage? And does the math change when you have a dependent to support? My HSA requires a minimum of $1,000 to remain in the account, for reference. I’ve done some Googling, and one source mentioned keeping two to three years worth of medical expenses on hand, but I’m unsure how that will change with a new baby.

For reference, I’m 32 and my husband is 38. He also has an HSA and no health issues but has significantly less savings, since he got an account only a few years ago and initially wasn’t making contributions. Therefore, I’m anticipating the bulk of baby medical expenses will be coming from my account.

—U.S Health Insurance Is Ridiculous

Dear U.S. Health Insurance Is Ridiculous,

Your instincts are excellent. Do not invest that money before August or until you get a good sense of what your new life as a parent will look like.

You’ve done everything correctly: You chose to open an HSA, you stocked it up, and now you have a baby arriving in six months. An HSA is one of the best accounts in the tax code—cash is tax-free going in, grows tax-free and comes out tax-free if you’re paying a wide range of qualified medical expenses—but it only works as a triple-tax-advantaged miracle if you use it strategically. Right now, for you and your growing family, the best strategy is liquidity.
Even a textbook delivery can easily run $3,000 to $5,000 out of pocket on a high-deductible plan, and complications can push that significantly higher. You already identified the risk: If the market drops 20 percent the week and your pregnancy takes a dramatic turn, you don’t want to be selling at a loss to cover your hospital bill.

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However, after the baby arrives and the dust settles, you might revisit investing whatever is left, keeping roughly $3,000 to $5,000 in cash in the HSA as your medical emergency buffer. Even with a good delivery and a healthy baby, you’ll have pediatrician visits, unexpected ear infections, and the general chaos of Year One. Once you’re comfortable with what your new family’s annual medical spending looks like — give it six months to a year — invest everything above that buffer. And, if you go back to work, continue investing as much as you can in your HSA without shortchanging your 401(k).

As for managed investments vs. brokerage accounts, at 32 years of age, go brokerage with a low-cost S&P 500 index fund. You’re young, the fees are lower (negligible, really), and this money ideally won’t be touched for decades. The managed option just charges you more for something you don’t need at your stage of life.

One more thing: get your husband contributing more aggressively to his HSA as soon as possible. Two fully funded HSAs with a baby on the way is the goal.
Congratulations on the pregnancy.

—Ilyce

Classic Prudie

I have an older relative in his mid-40s, who is, for lack of a better term, a creeper. His mother was a wonderful woman with one huge blind spot: her youngest son. She babied him incessantly and supported him financially. He never moved out of her home, is socially stunted, and though friendly on the surface, can be a huge temper-tantrum-throwing man-boy. Unfortunately he also has a habit of stalking women.

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