£100k inheritance, ideas?

[Fuuuuuckit]

I'm about to come into c£100k.

Mortgage is £60k,17 years left on the term, manageable repayments curently £350/M. Have been slightly overpaying where I can, just reduced term by 5 years.

Want to put something in place for the dc (age 18 and 15) which they can't fritter away, poss £20k each

Salary not great (£24k gross) but household bills manageable, I save a bit throughout the year for Xmas, Birthdays, car expenses, small holiday fund. No large savings.

House needs about £5k work doing reasonably soon - front/back doors need replacing, roof needs the bit at the side the wind has just ripped off refilling etc. Could think about replacing all windows if I had the funds available.

No long-term savings currently. Ds 15 poss going to uni, dd doing an apprenticeship. CMS for ds (plus cb, wtc etc) will end in 2 years which is a worry.

Had thought about overpaying the mortgage monthly rather than lump sum, to keep hold of the bigger share rather than just whacking it all away in one go.

I am a cautious saver and I am a lover of spreadsheets for all my monthly transactions. Will be booking an appointment with the adviser at my building society ASAP, but have you folk got any ideas?

Oh, and a bloody good (for us) holiday when I've got my head straight!

Sorry to hear of your loss. With that sort of sum I would see an independent financial advisor rather than the one at your building society as they will be able to recommend products from the whole of the market rather than just from one place. A good one will charge you but it's worth it to make sure your money is safe.

Personally if your mortgage payments are manageable ATM and your interest rate low I would put overpaying the mortgage low down your priorities. My 'budget' personally would go something like

1. Nice holiday, something to remember your loved one by and immediately required work on the house (c£10k).

2.Emergency fund, 6 months worth of expenses or perhaps c.£5k, keep this in an accessible account (not a current account but something with immediate access). I'd also consider buying a life insurance policy if you don't have one in place and also (strictly speaking not financial but worth doing) sort out your will and LPAs at the same time.

1. Money for DC, up to £40k, I'd keep this in your name not theirs if you don't want them getting access to it at 18, a stocks and shares ISA with a managed portfolio set at low risk would be my choice for the money, you can pay in £20k this financial year and £20k next.

1. Pension, if you haven't already contributed the maximum allowance into your workplace pension I'd do that, also potentially ask your advisor about a private pension as well (could be up to £40k if you have no pension at all ATM).
2. Any remainder could potentially go on overpaying the mortgage or into an index linked fund which potentially would pay out more than you'd save in mortgage interest and would have the plus side of being available to withdraw to cover any shortfall in bills e.g. when you lose maintenance for your DS...

You haven’t even mentioned your pension, which (unless you’re sitting on an amazing 5* salary DB scheme) is a big mistake. This should be your priority - you can’t afford to give to your children if you can’t afford your retirement. And, over time, pension investments in equities should outperform the interest you’re paying on your mortgage - so prioritise this over paying down your mortgage.

My priorities would be:

• £5k on the necessary work on the house
• £5k emergency fund in cash savings
• £5k on a special holiday
• Small fund for supporting your children in their endeavours - maybe £20k overall. A lower risk stocks and shares ISA could be good for this in the mid term.
• Rest into your pension, to the extent you need it. You can contribute either side of the tax year, to stay under your annual allowance.

Do you have a workplace pension? Most schemes now provide retirement income guides which would be a good place to start. Find out what sort of income you’re looking at and whether you can or want to live off that. Then take it from there.

similar to above,

1. repay debts except mortgage you don't mention credit cards or car loans so possibly nothing
2. 6 months basic necessities livings expenses ( mortgate plus all bills plus basic food fuel heating etc etc) into an instant access savings if your income is precarious 12 months might be better so 12k-24K
3. essential house maintenance 5k
4. rainy day new car fund so the next one is a cash purchase 5-10k
5. something to remember the person from whom you are getting inheritance could be a holiday piece of art jewellery 3-5K

this comes to between 25k-44k leaving between 56 and 75K for investing say 10K each for kids and you have 36-55K left to invest

1. Save the rest in your name, check out your pension, do you have any missing years ( national insurance) you can buy years

saving in your name is best, what use would it be if all money was in your kids name and you lost your job and couldn't access the money by saving in your name you can pay for driving lessons or help with the upfront deposit for them to rent a flat you can't afford to give them 20K each when you have no savings you could put it into funds labelled John and Mary in your head so you can dole it out when you think required, equal money in both pots, but if you needed your house rewiring or the roof collaped you could use the money, the best thing for kids is a stable roof over their heads, no kid that thinks their parents should survive on basic state pension only deserves a monetary gift

I would do it differently.

1. Do work on house £5k
2. Get 2 btl house to act as your pension. 25 percent deposit. £60k Don't know how much property is in your area but you can buy anywhere and get it managed by agent. You could use this to replace child support payments and CTC.
3. Holiday £3k
4. Money in accessible saving account £7k
5. £20 pension.
6. £5k to help child settle into uni.

I disagree caringcarer, I'm afraid. With interest rates likely to rise why would OP want to saddle herself with nearly £200k's worth of additional debt by purchasing 2 X BTL via a mortgage? Not to mention the 20% tax to pay on the income as OP is a taxpayer, plus all the associated costs and risks of being a landlord including void periods, maintenance, tenants refusing or unable to pay up for months etc (potentially more likely in low value housing with the cost of living crisis etc). Particularly as OP is worried about fluctuating income in future so could really use a more liquid asset. And the risks of course of a housing crash and OP having all her capital tied up in housing which I think is quite unlikely but OP describes herself as a cautious saver so she should be guided towards a diverse, low risk portfolio IMO.

Personally I really don't like small scale BTL as an investment at all for anyone but if you are going down that route I think you need substantially more capital than OP has to invest to ensure you can scale up, and a particular insight/interest in the housing market so as to identify particularly good long term growth opportunities which is where the profit margin really is, and ideally some skills and ability to do the management yourself, as otherwise agents fees eat into your yield so much. Yes of course a house can be a pension, but so can an investment fund, premium bonds, or, well, a pension which is specifically set up to be low risk, tax efficient and idiot proof which is surely what the OPs after?

That's even assuming OP can get a BTL mortgage on her salary which given most lenders want at least a salary of £25k won't be easy, let alone 2 separate mortgages. Lenders these days are much more cautious about BTL than they used to be as it's not the automatic profit generator it once was. So the point is probably moot anyway but even if OP used her £60k to buy a cheap place outright I think my point would stand...

I certainly would pay off the mortgage. The money that you save I would put in a regular saver account. At present National Savings are paying 1.3% on a 3 year Green Bond. This is fixed account and is the highest of the safe savings at present.

You still have time to invest in this years ISA and next years too.

Gosh, some quick responses!

I don't have any debts except the mortgage.
I pay into a workplace pension, local government scheme but its not a huge sum as my salary is comparatively low. I'll dig out the paperwork.
I do already have a will which will not need updating.
I do already have a good amount of life insurance, but will get that reviewed.
My benefactor's wishes were that the dc DO get a share, a useful amount but did not specify how much.
I'm not interested in BTL at all, I really don't want to risk un-tenanted months, bad tenants or bonkers interest rates as I have no cushion if I've invested all the money in the BTL.

I'd not considered pension over than mortgage, but am aware that my 'income' will be reducing in 3 years when ds leaves full time school. My household expenses will reduce in that case, but so will income, mortgage reduction is quite attractive.

Essential house repairs, holiday and emergency fund are priorities. Would also like to pay for some jewellery to be remodelled. I'm not going to be splashing the cash in the meantime.

Good call on the IFA, but in my experience the FA at the bank has matched IFA advice (re investment suggestions, not necessarily in the same funds, obvs), will use the free advice first and then take that to the IFA (who did my life insurance stuff too)

Thanks everyone!

I'd definitely see a financial advisor

The benefactor was the dc's grandparent who died frustratingly intestate, hence my wanting to honour their wishes re the dc having a share towards house deposits etc

I don’t think you need a FA with that sum unless it was to set up additional retirement savings if you cannot put additional funds into your workplace pension.

I would suggest:

• £5k essential repairs on house
• £5k in readily accessible savings (prob only get .5% interest)

-£14k (7 for each child) in ISAs. £1k toward special holiday or something to remember deceased by £75k retirement savings - split between ISA and pension contribution. Unless you have £1m already saved, in which case pay off your mortgage.

All the above assumes your mortgage interest rate is fixed at less than 3%.

I'd pay off the mortgage so you have more disposable income for the next SEVENTEEN years

After paying off mortgage I'd invest the rest and then split the profit between DC's when they're of age

As you are risk adverse, you don’t need an IFA. They deal mainly with stock market and other unpredictable investment.

Research the money advice sites, but keep in mind some of these the accounts they recommend are sponsored by the provider.

Also check our you local small Building Societies. They often have excellent rates for local people residents.

if you pay off mortgage you are 350 a month better off for 17 years no worries about interest rates going up or anything, if you currently manage on salary and can avoid lifestyle creep you can save 350 per month you still have 40 K

5k house repairs, 10k emergency fund 5k for holidays and jewellery remodel 5k each for the children but can add to that out of the 350 per month or can use the 350 per month as say 200 into long term savings (100 for your pensionor ISA £40 for you personally £30 for each of your children) £100 for short term like annual holidays and £50 for treats per month you might get more joy out of that than knowing you have 70k in bank but still paying mortgage
paying mortgage and investing may or may not be better due to inflation and rising costs and interests rates not keeping up but I think it may stabilise towards end of year but at a higher rate than currently as everything post covid rising energy etc going a bit haywire I would do essential house repairs and sit tight no need for any decisions in a hurry

As a low risk person, with income reducing in the future due to loss of CB, WTC, CMS payments, I would pay off your mortgage as a priority. The interst oayments you are paying whilst they are likely to be low, are still costing you momey. If you invest the funds instead you need to esure the return you are getting is greater than the borrowing cost. If you sit in cash thats unlikely! Paying off the morgage is a great feeling of relief and will provide you with extra funds each month, making life a little easier (espcially important witht he reduced income comming inthe future). With the money you are not paying on your mortgage consider increasing your pension payments for the future, your employer may even match your contributions if you are lucky. Do check out what your employer scheme offers. Get the work done on your home also as a priority. I think the amount you want to give your children is too generous, given that you are single and not a high income earner. I would keep some money aside earmarked for them but keep in your name. They are too youg to be gifted money and you would otherwise need to set up Trusts for them. You could invest some of the funds in a risk appropriate investment. Your capacity for loss is relatively low (you cannot easily replace funds due to low earnings), so don't take risks that are out of your comfort zone.
Do have a nice treat holiday or do something special. Other than that don't rush any decisions.

I have to say I would probably pay off the mortgage, 10k each for the children, 10k emergency fund, and the remainder for holiday/ jewellery/ repairs.
I would then also pay as much as possible into my pension from the amount I'd saved from the mortgage, and save a smallish sum over a longish period to add to the dc's pots.
I'm shite at money though- but I can't imagine how great it would be to have the security of a home owned outright.

@FindingMeno

I have to say I would probably pay off the mortgage, 10k each for the children, 10k emergency fund, and the remainder for holiday/ jewellery/ repairs. I would then also pay as much as possible into my pension from the amount I'd saved from the mortgage, and save a smallish sum over a longish period to add to the dc's pots. I'm shite at money though- but I can't imagine how great it would be to have the security of a home owned outright.

Think this is what I would do.

You can check early repayment calculators to see how much interest you will save. We came into some money and checked / by paying off our mortgage with it we have saved 30 grand in interest.

If you pay off 50k on your mortgage now, and continue paying 350 a month, it’ll be paid off in3 years, just after you lose money for your ds.
You can’t put a price on peace of mind of having no mortgage to pay!

@Bobbybobbins

You can check early repayment calculators to see how much interest you will save. We came into some money and checked / by paying off our mortgage with it we have saved 30 grand in interest.

www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/

I don't know what your salary is but can you afford to change your mortgage payments to £500 pcm? Would you consider buying a small property to let and use the money to top up pension?

Use the money from rental property income to top up your pension that should say.

Saving in cash is not without risk. Leaving all your savings in cash would be leaving you open to inflationary risk especially if you’re likely to have some years before you give money to the children.

I’d do the following:

*5k allocated for house repairs
*5k holiday/jewellery
*15k emergency fund in premium bonds

• 20k into a stocks and shares isa and another £20k in April in the new financial year - you would then be able to decide if you wanted to give say £15k each to your children at a later date but presumably they are a way off house deposits so have some time to invest. £20k pension (into a sipp) £15k reduce mortgage either as a lump sum lr drip feeding overpayments depending on your contract.

You’ll have a good pension if your in a DB scheme but may need to save up to cover the gap if you want to retire before pension age.

Consider how much £ you’ll need in retirement and whether your pension will genuinely cover it… ?

Then top it up before the end of THIS financial year (especially whilst stocks are cheaper right now).

Add more pension from April 6th for the next financial year.

THEN reduce your mortgage …

And avoid any crypto nonsense or whacky investment schemes.

Inflation might be 10% this year according to the Times today so any cash savings will be only worth 90% this time next year. Don’t keep too much in cash!