What to do with £100,000 inheritance?

[Pitstop1986]

This is not meant to be a show off post...

I was brought up in a very poor household. We never had money, went without and really struggled. I worked since I was 13 years old. Always saved, I went to college, but also worked alingside studying,. I went straight into full time work after college, and worked a second job in the evenings and saved. I bought my first property at 19 and always made mortgage overpayments and continued to save. At 25, I put myself through uni, got a better job and worked really hard.

Now in my early 40s, I am married with 2 kids, own my house outright, own my car outright and have enough money left over from my wages to put into savings/investments each month. Saying that, i don't spend frivolously, i am still in the "i am poor" mindset that i grew up in and don't like to waste money. I have just found out that i am due to inherit approximately £100,000 and I don't know what to do with it...

Would you invest, splurge on a holiday, do some work in the garden (my house was only built 5 years ago, so I don't need to do any home improvements) plus, I don't need a new car- i'm happy to drive mine until it falls apart.

What would you do, if you were financially comfortable and was about to get a quite substantial sum of money?! I do love holidays, but we usually only go once every 18 months or so.

I would speak to a good financial advisor.

As above. A good IFA and I would prioritize pensions and intergenerational wealth for your dc if you're already comfortable. Personally I wouldn't use it for holidays, cars etc.

IFA as above. But 5-10k on a very nice holiday / travelling somewhere you've never been and always wanted to go.

If you have no mortgage I'd prioritise your and your DHs pensions, plus savings for the DCs.

But keep some aside for a nice holiday too.

You've done amazingly well to be in the financial position you are now in. Continued financial prudence will serve you well but if it was me, I'd have a wee splurge with some of it.

You do NOT need an IFA for this....

What's your situation pension wise???
Do your kids have pensions????

I'd be inclined to leave the house alone.

Top up pension(s) (maybe 40k)
£20k in a S&S ISA now another £20k in april (these are investments you can use for you or the kids... I dont particularly love jisas)

That leaves 20k

I'd be both your kids pensions across 2 tax years (aj Bell or vanguard is fine) that is approx £10k.
Remaining £10k....i'd get earmark £2k get my colours done, clear out the wardrobe and buy a few really decent items (£100+ each ) and then some high street bits to make a capsule wardrobe
£8k for AMAZING holidays or activities.... peppa pig tea bus... go ape... sleeping in the bubble.pod at port lymphne / safari / skiing / whatever makes you happy. You quite literally only live once.

Watch the Rebel Finance School videos and join the FB group. Basically it means invest now so you can retire early and enjoy life. Your money makes you more money (if you don’t spend it!)

I was in a similar situation/amount three years ago. Full disclosure; I’m an accountant and personal finance obsessive so I always know my/our priorities!
paid off DH’s student loan of £16k/6%
paid a little chunk off the mortgage
bought a pony tbf our old one was retiring, don’t copy me on this one; ponies are seldom an investment (though she did lower my blood pressure today with a rare tolerating-mum-cuddle)
maxed out both of our stocks and shares ISAs (about £30k allowance left as we’d been paying in already), vanguard 80% equities fund
gave our lovely nephew £3k towards first car/lessons
put £10k in premium bonds for a self insurance horse fund
paid off a once in a lifetime Disney holiday that I’d put on a 0% credit card with a longer term plan to pay off
started SIPPs for the kids
So, a mix of spending/saving but it all depends on your priorities

What’s your pension like, personally I’d plug half into that. £10k on a rainy day fund, 20k on a few really nice holidays and £10k each into savings for your DC.

I wouldn't get an IFA because I would be confident myself,now I've followed rebel finance school... These are my personal choices
I would

1. Clear any debts
2. Put 3-6 months salary in an emergency fund that's easy to access. You can get 4.5percent interest on a chase bank easy saver
3. Get a SIPP pension on vanguard. Put about 10k in that.
4. Get your kids a pension each on fidelity platform (no fees for kids). Maybe 5k each.
5. Spend 5-10k on immediate fun
6. Give some away to charity like the kids school or youth club or dementia charity.
7. Put the rest in an stocks n shares ISA. Vanguard platform is very easy and simple. Really nice app as well.

Good luck.

You can only contribute up to £2,880 annually to a child’s pension.

I think a new wardrobe is definitely in order- I usually buy bits from Ebay and actually haven't bought new clothes for myself that haven't been a sale price in years!

I have a NHS pension, my husband is self employed and has a private pension, plus we put money into stocks via a trading 212 account for our retirement. My husband wants to invest the majority of the money, but i agree with others for settling up something for the kids. They are 5 and 3 and have some money put away for them, but it's always an idea to put some away for their future for either uni or help getting onto the property ladder.

Thanks to all those who have replied with advice

Invest in ISAs. It will take you a few years to transfer it all in, but you want to get the money inside the ISA wrapper so there is no tax. Then you can invest in a low cost tracker fund and leave it to grow.

you could do this diy with hargreaves landsdown or similar, or go to an IFA. But watch out for % fees that eat into your investment. There will always be some fee, but 1.5% makes a big hole compared to 0.75%.

I was in a very similar situation. My money is invested in bonds with prudential. I can withdraw 5% of the capital every year, tax free. The amount rolls over if I don’t withdraw it. It grows at @6%each year. We’ve bought cars, had a very expensive holiday and done some home improvement work, and we still have the amount that was originally invested. We only use the tax free element.

I agree do not use (pay for) an IFA.

It’s an ideal question to explore with AI.

@Nix32Can you explain more about bonds? That seems a great rate but I see bonds are in the headlines a lot and the tone is doom-y (because the govt is having to pay that interest rate). How does a person buy bonds and what are the risks?

@ArcticThistleTo be honest, I don’t know. The money had already been invested before it came to me. I know it’s a product that can only be accessed through a financial advisor. It does appear to have safeguards built in - if prices are dropping then alterations are made. I freaked out about it during Covid and spoke to an IFA who said it was where their personal finances were invested and that it was the safest product available.

Save some for the kids to go to uni. A debt-free start for them is a fabulous advantage.

Your NHS pension won’t pay out until you reach state retirement age, so I’d put some in a SIPP (a private pension) to give you the option of retiring a bit earlier or reducing your hours when you reach late 50s/60s and want to wind down a bit.

A SIPP is much more tax efficient than an ISA to bridge the gap until you qualify for your NHS pension. The government automatically adds 25% to whatever you put into a SIPP, so £80 becomes £100. You have to pay income tax when you take it out, but if it’s your only income for those years then you won’t have to pay income tax on anything below your personal allowance.

Unless you have no self control, I'd save for the kids within my own ISA allowance. You have no idea what your kids will be like at 18 - it's not a great age to receive a lump sum. And if some other disaster happened that accessing money would fix - I'd want to be able to get to it.
So as you have no debts max out on ISAs first - that's 40k (dh and you) and slide another 40k in after April 27. Leaves you with £20k - maybe £10k in your pension and £10k for a bit of a splurge.

Yes, this re savings for kids. I've been sVing for my children since they were born in an account in my name, exactly for that reason.

This time next year, they'll both be adults and it'll still be up to me what to spend it on. It will be for them though, no question.

Please, please ensure your bond is written in trust for your kids. I paid ludicrous amounts of IHT on my Dad’s and then had to pay chargeable event tax out of the estate too. Over 50% of the investment went in tax. If it’s written in trust at least IHT isn’t owed. He hadn’t withdraw a penny in the 18 years he had it so didn’t even get any benefit!

OP, I’m following with interest as I really need to sort myself out with some new investment options.

I can see Chase has been recommended as a good home for the money in the meantime. 4.5% instant access means you can earn whilst you decide. I have five referral codes… BB9SMP will give us both £50 if you pay £1k in.

I like to reserve the right to decide whether it goes to them in the event of another family need. For example if someone needed life changing surgery not available in the UK and that cash would cover it. Had dh & I lost our jobs through ill health and that cash would pay the mortgage and keep a roof over our heads and therefore allow them to continue their education in the same school - because this would impact on them too.
I know it all sounds a bit over dramatic but I'd rather have the option - it's not their money till we hand it over.

Max out isa this year and next for me and my kids junior isas, and 50k on premium bonds to try and win a million tax free

Don’t forget change in ISA allowance from next April. Stuff it in before then. I have the same amount in cash ISA and need to shift some into pension and S&S ISA.

If you have not put £20k into an s&s ISA this year do so then again in April so £40k. Add to your pension, open a SIPP. I'd go on a nice holiday next year and put rest away for kids uni.