I have had two clients ask me in the past week if they should use funds that they received unexpectedly to pay down debts or save the funds.
My answer was different for both clients. Let’s look at the circumstances.
Client # 1 has a daughter with student loans that is also looking to buy a house. Their question was regarding where to gift the dollars for student loan or down payment? I felt that since the loan payments have not been a burden, putting the funds toward a down payment and avoiding PMI would be better in the long run.
Client #2 also has student loans and will be graduating soon. My recommendation was to pay extra toward the highest interest loan, but to keep the bulk of the funds available for an emergency fund.

Everyone is different; therefor, the use of funds will be different too. There is no correct answer for everyone.

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