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Original poster

Unexpected inheritance - what to do with it?

39 replies

dontpoisonthewaterfountain · 06/08/2024 23:32

Been left an unexpected inheritance from a god parent, around 80-100k, probably closer to 100 but airing on the side of caution.

we are not investors. not knowledgeable in the area, never had the cash. how do we make best use of this money? I want to get it right for her and for us.

to give an idea of our sitch:
cash isa, a s&s isa each with around 15k (considered emergency money)

mortgage: owing around 450k on a 800k home. Currently at 1.8 but will increase in 2026.

Both employed. Both paying around 18% total into work pensions and have been since about age of 24/25. (I’m 35 DH is 40) Decent ish pot. Employed full and part time between us.

Household income pre tax approx 150-160k

DS 5&7 have a couple of grand of premium bonds each that we add to monthly.

My thoughts are to take 5 grand for a holiday (child care has had us in 1700/month choke hold for much of the last 6 years so no big trips have been had) and then the logical option seems to be to just pay the rest off the mortgage. Sensible? Or no?

What would anyone suggest in our position?

Open to any and all ideas.

OP posts:
Summertimer · 06/08/2024 23:33

Bank it in a savings account

3peassuit · 06/08/2024 23:35

I’d always opt to pay down debt. A good holiday and paying off a chunk of mortgage sounds a solid plan.

Flippinec · 06/08/2024 23:37

Pay off the mortgage. It's pretty likely you'll save more interest than you would make investing that money over the same period.

Btw it's 'erring on the side of caution'

NoBinturongsHereMate · 06/08/2024 23:39

Your emergency fund seems quite small in comparison with your earnings, mortgage and costs (and emergency funds should be in something stable rather than equities). How long could you live on it if necessary?

Original poster
dontpoisonthewaterfountain · 06/08/2024 23:43

Flippinec · 06/08/2024 23:37

Pay off the mortgage. It's pretty likely you'll save more interest than you would make investing that money over the same period.

Btw it's 'erring on the side of caution'

airing sounds nicer :) but thanks! Noted

OP posts:
Original poster
dontpoisonthewaterfountain · 06/08/2024 23:49

NoBinturongsHereMate · 06/08/2024 23:39

Your emergency fund seems quite small in comparison with your earnings, mortgage and costs (and emergency funds should be in something stable rather than equities). How long could you live on it if necessary?

It is quite small I agree. Especially vs the mortgage. Just the result of lean years on Mat leave, then further reduced working hours & paying the nursery bills and buying the house. We have all relevant insurances (income protection, life, critical illness) and work in a readily employable field- so on balance, not hugely concerned but also would like to rebuild it a bit for sure. Absolutely. The cash ISA is the only one supposed to be the ‘emergency fund’ if needed- can be accessed easily.

Income is ok ish but costs are high. and going to get higher with the interest rates. It is so daunting.. so maybe a no brainer to pay that down.

OP posts:
Overtheatlantic · 06/08/2024 23:55

I would consult with a financial advisor.

Polarnight · 06/08/2024 23:57

Is this a brag?

Jesus see an IFA

NoBinturongsHereMate · 06/08/2024 23:57

I wouldn't. Not for that amount.

NotSoHotMess24 · 07/08/2024 00:04

I'd go and live in a spa for a year, and buy a pair of really nice Doc Martens, in every colour I could get them in...

Original poster
dontpoisonthewaterfountain · 07/08/2024 00:07

NotSoHotMess24 · 07/08/2024 00:04

I'd go and live in a spa for a year, and buy a pair of really nice Doc Martens, in every colour I could get them in...

Dreamy. I did wonder if moving to a cabin by a lake was reasonable on this sum but alas apparently not..

OP posts:
coffy11 · 07/08/2024 00:10

Definitely a little bit for a holiday and then the rest onto the mortgage.

Freetodowhatiwant · 07/08/2024 00:13

With 100k I would spend 10% on fun stuff like a great holiday, then buy an investment property with the remaining 90k, do it up, remortgage that one and buy another and keep going. I realise this strategy isn’t for everyone but it has worked for me and that’s what I would do.

confusedlots · 07/08/2024 00:15

10k for holiday/fun stuff. 90k in a good savings pot and take 75k out in 2026 to pay off some of your mortgage at the point when you need to remortgage (wouldn't pay it off sooner as you're still on a very low rate).

RB68 · 07/08/2024 00:36

you sound quite risk adverse. In your situation if you are the part time earner I would top your pension up some to get somewhere nr DHs value if you can (or longer term look to add more to pension for yourself from the common pot) if your mortgage is currently 1.8% I would bank the money in the best savings accounts you can find and earn the 4% odd interest until mortgage change then add the money to the equity in the house. Remember the 80K limit per bank account though (for safety of money in a bank account should the bank go under etc)

We chose to have work done on the house, pay down a chunk of the mortgage and invest in out company. We also got a few things that we had been putting off like new mattresses

scotstars · 07/08/2024 00:37

10% to fun/holiday. The rest put in a fixed interest rate savings account that you can withdraw in 2026 to pay into the mortgage I wouldn't pay it off earlier as you will get a higher savings interest rate than your current mortgage rate

Carrotsandgrapes · 07/08/2024 00:46

It's tempting to pay off the mortgage, but often you'll get a better return from saving the money. You can find calculators online.

I'd use some of the money to enjoy yourself. Then I'd be boring!

You don't need an IFA for 100K. There's loads of useful, sensible info online. Follow this flowchart for a good starting point: https://ukpersonal.finance/flowchart/

If you're a podcast person, the meaningful money podcast is good.

The Flowchart - UKPersonalFinance Wiki

A starting point for your financial planning journey in 8 steps, from the wiki for Reddit's /r/ukpersonalfinance!

https://ukpersonal.finance/flowchart

Original poster
dontpoisonthewaterfountain · 07/08/2024 00:49

Certainly risk averse @RB68 - probably just because we have such a large mortgage and have never had real spare £ before. So grateful for this little chunk at this point of our life.

Thanks to all those who have flagged to high interest account it up until mortgage rates tip higher than an account could provide. Clearly a better approach than paying it in immediately, I wouldn’t necessarily have thought of it though.

@Freetodowhatiwant investment property did cross my mind but this is off the cards unless the sum is unexpectedly far higher than we thought it to be. I’d love to have the guts and the funds to explore this though.

OP posts:
Original poster
dontpoisonthewaterfountain · 07/08/2024 00:55

Carrotsandgrapes · 07/08/2024 00:46

It's tempting to pay off the mortgage, but often you'll get a better return from saving the money. You can find calculators online.

I'd use some of the money to enjoy yourself. Then I'd be boring!

You don't need an IFA for 100K. There's loads of useful, sensible info online. Follow this flowchart for a good starting point: https://ukpersonal.finance/flowchart/

If you're a podcast person, the meaningful money podcast is good.

That flow chart is very helpful to the basically financially illiterate like me - I do intend to learn more so as to equip my boys a bit better than I was/am. Thank you

OP posts:
caringcarer · 07/08/2024 01:03

Have the nice holiday, give the kids £1k each in premium bonds or Junior ISA and I'd pay the rest off the mortgage provided you won't break terms of your mortgage. You have a great rate now but once your mortgage fix runs out you won't get another one so paying down your mortgage is a no brainer as you'll save so much interest.

ImikSiMik · 07/08/2024 01:30

I'd put £50k in premium bonds (max amount)
£20k stocks & shares ISA, £20k mortgage over payments & £10k towards holiday.

Biggaybear · 07/08/2024 02:08

As you seem to be higher rate taxpayers then Cash Deposits wont give you a great return if you are having to pay 40% tax on the interest.

As you are risk adverse I would put £20k each into a Cash ISA & the rest into Premium Bonds until your mortgage is up for renewal. Then see what the interest rate is & pay off a chunk off the mortgage. But leave yourselves £30k-£40k to help the kids in later life - but split some into Stocks & Shares ISA's for long term growth.

Dont buy investment property. Most tax-inefficient and illiquid asset there is.

Hucklemuckle · 07/08/2024 20:15

Summertimer · 06/08/2024 23:33

Bank it in a savings account

Not a savings account. A term/time deposit so it can't be touched until the interest rate on the mortgage goes up.

OP you'll likely get more interest on account than you will be paying but if you put it in a bog standard savings account tyre will always be risk of spending it.

Come 2026 throw it at the mortgage.

Hucklemuckle · 07/08/2024 20:16

Flippinec · 06/08/2024 23:37

Pay off the mortgage. It's pretty likely you'll save more interest than you would make investing that money over the same period.

Btw it's 'erring on the side of caution'

No way. She could be earning 4-5% on a term deposit.

VWT5 · 07/08/2024 20:19

ImikSiMik · 07/08/2024 01:30

I'd put £50k in premium bonds (max amount)
£20k stocks & shares ISA, £20k mortgage over payments & £10k towards holiday.

Perfect. That’s what I would do. Premium Bond average returns are particularly good at the moment.