What should I do with this money?

[Illputtheminapie]

I'm very lucky to have come into £75,000, and I just cannot think what to do with it for the best.
I'd be glad of any perspectives please.

I guess we could pay it off our mortgage, very sensible.

We could stash it for a rainy day (although our income is good so we don't feel particularly exposed) or I guess save it for our kids to be deposits on their first homes or something like that

We could save it for a deposit for a holiday cottage somewhere one day

We could try to have a go at flipping a property (I realise it's not enough on its own to do that)

We could start up a business of some sort, but frankly I don't have any burning ideas that I think I could make a success of!

We could have a go at investing it somehow to make more, but we have zero experience in this.

What do you all think? And are there any options have I not considered in your opinion?

@Blankiefan we're around the 40 mark

@SandysMam

I would:

1. 5k on something fun - holiday or something immediate maybe for the house (OK not that fun but something you wouldn't have done without having the cash)
2. £40k off mortgage - you'll reduce term or payments and ultimately the amount you actually end of repaying.
3. £30k in premium bonds or another 'safe' investment - and then if you decide to use on children in the future or invest in something else it's there for you

Good luck deciding - it's a nice problem to have :)

Look at your mortgage rate before paying it off, mine is 0.4%, paying it off would be stupid.

I'd go for premium bonds, a holiday and some pension contributions. No need at all to pay for advice unless you have a significant 6 figure sum, which you don't.

@SandysMam

If you are already financially secure then please take 10k and do something amazing with it. Make your life amazing and make fab memories for your kids. Do something boring and sensible with the rest but really, really enjoy a bit of it!!

I agree with this, and then pension savings for most of it.

If you get an inheritance later, brilliant. You can use that to do the more risky, less sensible stuff. But if it gets swallowed up in care fees, which is always a probability, then you’ll still have had years of investment growth from this windfall.

Look after your own future (so your kids don’t have to worry) and then look after them/nice to have stuff. Paying off the mortgage isn’t as good a financial decision as investing for the future, but I understand the draw, so I’d maybe do a little bit of that (check your terms, 10% of balance overpayment is standard), mostly invest into pension or S&S ISA and then certainly have fun with some of it - holidays, home improvements, whatever.

I was in your position about 20 years ago, similar age, similar amount of money, 2 kids.

We treated ourselves to a few nice things and then paid off the mortgage. I've never regretted doing that, purely to give us peace of mind that our home would always be safe. And to be mortgage free at 40 felt pretty good. We are very risk averse though.

@Blankiefan is right. Stuff most of it into your pensions and enjoy the rest. If your mortgage rate is low, don't pay it off as there are far better uses for your money. It's probably the lowest rate loan you'll ever have, and if you are comfortable financially it's not worth paying it off, nice as it is to be mortgage free.

Don't rely on an inheritance in case care homes feature and there isn't one.
I'd enjoy 5k, put 45k in PB (I have the full amount and win every month) and top up your pension with the rest. The advantage of PB is that your capital is not at risk and you can access it quickly if necessary and as you don't need the extra income you can have the winnings automatically reinvested until you reach 50k. I also am risk averse and this is what I'd do in your position.

Pensions beat property. As pp said medium risk, if you are in your 30s or 40s. My medium risk fund is 50% global shares and 15% uk shares, some bonds and property etc. By putting it in your pension you get tax relief, so you put in 80, you get 20 on top in tax relief.

Another option is a stocks and shares LISA each for retirement. You can't access it until 60. You can put in 4k p/a I think until you are 50. Government tops up 25% odd. You could hold some in premium bonds and move into the LISA annually.

Put some to lower the mortgage. Check terms. I can pay 10% in overpayments p/a.

Top up short term savings. Start a fund for kids. And have some for fun.

We are in a not dissimilar position to you at the moment, so have been thinking on this a lot. I agree with the others that low interest debt like your mortgage can wait. You stand to gain a lot more in compounding interest from shoving the money into your pension and ISAs. Also, the money you pay into your house is immediately illiquid, which is less useful than, say, having it in an ISA to use for your children’s university education if you decide to do that.

I also agree with others that you should set aside a specific amount to use/enjoy with your family. An nice big holiday or something that you wouldn’t normally be able to do. Maybe upgrade appliances that you know are going to die soon.

With that money out of the picture, I think priorities should be:

• clear your debts if you have any (except the mortgage)
• make sure you have 6 months’ expenses (like, what you actually spend, not a bare bones calculation) in cash reserves
• max out your employer pension match at work if you have one (that’s free money)
• max out what you can put in tax free/advantaged accounts like ISAs for this year
• max out what you can put into your pension fund for this year

Whatever is left, I would save for your children’s futures. Are you currently sending them to private school? Is that something you may decide you want to do on down the line? Regardless, your future self will thank you for having money stashed away to use for things like school trips and the more expensive extracurricular activities. They may need driving lessons and a car if you live in the country and don’t want to be their chauffeur. It is a good idea to plan for the flurry of education-related expenses around their late teens/early 20s, I think.

Don't waste any on an IFA for a start.

• Clear expensive debts
• Keep some in readily available cash savings/premium bonds
• Pay some into your pension

I largely agree with indeedy do.

But are you planning to move again? Having more equity can enable you to leverage to a bigger property so if this is the cards it is another option if being able to stretch to a larger property is an issue. If this is your likely biggest property then I wouldn't put it in the mortgage.

The LISA/pension debate is worth exploring. If you are 40% or higher income tax payers, you get greater relief on the way in (20% into pension, 20% back via tax return). But you will be taxed on pension on the way out. You won't be taxed on the LISA on the way out. I can't remember if you need to open the Lisa before 40, or by the end of your 40th year, but check this asap. I would open a Lisa if possible because you get an additional 25% up to 4000 per annum on a use it or lose it basis, up to age 50. Just open it, you can decide whether to use it or not later. The other reason you might favour a Lisa over a pension is the pension lifetime allowance (the max you can put in over your life including growth inside the pension). So you might prioritise Lisa now then pension later when its clearer what tax band you peak in and how close to lifetime allowance you will be. Both are tax wrappers, the investment inside can be the same.

I totally agree with exploring Jisa and pensions for the kids. Very small amounts in pensions now have the advantage of a vast compounding time so grow in a phenomenal way.

I like to buy one nice thing to remember the person, e.g. a painting, a piece of jewellery. It's a lovely way to remember the person.