What to do with £100k

[Unexpectedmoney]

Hi mumsnet. Have name changed. Dh has unexpectedly inherited more than £100k. Background of slowly clearing debts for more than 10yrs, we were down to the final £6k. This is a big shock. We never expected to be in this position. There are a few definite dos. We need a new car before ours 13yo one dies. We need new glazing in the window frames at its perma fog. And new carpets. We have 2 dc's age 3 & 6. We want to put them aside a decent chunk each, towards uni or have a house deposit (they are 3 & 6yo). This is something we never had. We don't want to stay in this house forever but plan to see out primary school. We could do up our house to the tune of £20k. Or go for it more for £40k. It's enough money to clear 3/4 of the mortgage if we choose. What would other people do, in this position? And anything we choose to save, how do we actually do that? Bonds? Savings accounts? Have never had any money before! To be honest I feel funny about being in this position hence asking on an anonymous forum. Will of course get some financial advice too but need to have my own thoughts straight first.

Clear the debt. You could clear some mortgage but it would be better to get advice from someone who can crunch the numbers and see whether you’d be better off paying off the mortgage and saving the money you save each month, vs investing the inheritance as a lump sum. Investment ISAs are better than cash ISAs, and locking your money in gets you a better interest rate.

I’d write down a wish list of everything you want/need then whittle it down: I’m not sure you can have everything from your list of the car, the windows, the DC’s house deposits, new carpets, tarting up the house, and pay off your remaining debt. Don’t imaginarily spend it all at once!

I definitely wouldn’t spent £40k on a house I wasn’t staying in forever, unless you live somewhere where prices are going to rise rapidly to make that money back. I’d do the necessary – repairs, maintenance, non-foggy windows – but hold onto savings for the next, forever, house.

It’s worth speaking to a financial advisor, but I would defo clear all debt first.

Clear debt - it frees up income and provides peace of mind. If there’s anything left top up your pensions - living on state pension alone is v difficult

Clearing the debt is a done deal!

You don't need to speak to a financial advisor re that amount of money.

Clear your debts as first priority (excluding mortgage); set some aside for a savings buffer if you don't have one already; budget for the car; work out what is necessary expenditure on your house i.e. repairs etc.

If you don't have other readily available savings, keep the cash in a savings account or you might want to consider some premium bonds in the short term (as interest rates are so low). Not worth risking it on the stock market.

It's a lot of money but not financial advisor territory. Clear debt, pay chunk of mortgage, put some in junior ISAs for kids and the rest in premium bonds. ISA interest rates are low atm. Premium bonds not much better as @swimster01 said. Then you can access it when you move for moving costs etc.

I’d put the whole lot towards your mortgage and then over pay the remaining mortgage debt so that it’s completely paid off by the time the kids leave primary school and you need to find your forever home. It will open possibilities of what you can afford next.

In relation to your kids mortgages you can always release a bit of equity to help them when they are aged 25 30 or what ever.

With mortgage rates so low, and naff all interest on savings, I'd say spend it on the large items that will improve your life long term.

So new boiler, new windows, new patio, cottage in France, new boobs (!)- whatever.

If your mortgage is about 2% I would not bother paying it off unless you're after early retirement or have income security fears.

Opening a savings account for the Dc is a good plan. I paid all my child income into mine and when they were 18 (Dtwins) it was quite a nice lump.

Bear in mind 99.9% of financial advisers will whang on about pensions. Make your own mind up about pensions before seeing them is my advice. They will push that on you as that's where their income comes from.

id pay off £90k on the mortgage and then with the money im not spending on the repayments id use this to save up for the other things, in the long run you'll save more by not paying interest on your mortgage . also you'll have that security

Any amount you save by clearing any of the mortgage is well worth it, even if only paying 2% on that mortgage. But I would agree with prioritising immediate life comfort things like sorting out the car and double glazing, and of course paying off the high interest debt.

So, £100,000.

£6K pay off debt.
£10K car? (Family car bought outright second-hand, 3ish years old?)
£5-7K windows? Depends on how big your house is.
£2-3K carpet?

So, you've got about £75K now.

You need 3-6 months regular outgoings in an easily accessible account. Say £15K? Lots of people recommend Premium Bonds.

What are your pensions like? You need to save into your pension before you save for the DC. By all means put some away earmarked 'for the DC' in a couple of S&S ISAs, or similar, that you can leave for the longer term, but keep it in your names - then if you need it you can access it. So maybe £5K x 2 'for the DC'.

Now you've got £50,000, if you haven't paid anything into a pension yet.

In this scenario, I would not spend £40K of it on a house I was not intending to live in past 7-8 years, unless I was sure it would add value.

So if you spend £20K on doing it up (bathrooms, kitchen, decoration?) then you have £30K left. Which I'd pay off the mortgage, if pensions were sorted. If not, I'd whack it into pensions but keep a bit for a lovely holiday.

Those that have said it’s not financial advisor territory - can you explain why?

My husband had £130k left of his inheritance after paying off some of our mortgage; we decided to set aside £25k each for the children and £80k in our names. And we have used a financial advisor to invest for us. We’ve made approx. 7% interest each year over the last 3 years (way more than our mortgage). How else could we have done that without a financial advisor?!

Whereas my instinct used to be 'pay off the mortgage', the advice we had, when sadly we inherited with a young family, was this.

If you pay off your mortgage, MOST people will very quickly get used to having more 'disposable income' every month, and most people will then spend a bit more here and there, splash out on this and that, and you will never build up a savings bank like this again. Which is fine is your dc are grown / if you already own the best house you are likely to want / if you didn't want to be able to support your dc when they are young adults. You will then find it difficult to take on another mortgage when you move in 7 or 8 years.

I disagree with the 'don't see a financial advisor'. Honestly, the fee you will pay will be chicken feed compared with what they can help you earn from that money.
I really, really, really would urge you to speak to an IFA. They know about things that those of us who do not work in the world of finance, and who never expected to have £100000 arrive in a lump sum, do not.
There are investments you can make that are low risk and will mean you have the money there when your dc are grown, or you can draw down on it if your life changes a lot before then and you need / want to.

Definitely important to only spend the money once.

By the sounds of things that would be:

1. Pay off the debt. (6k)
2. Essential house repairs. (Probably another 6k - 12k running total)
3. New-to-you reliable replacement car? (Say another 6-8k? 20k running total).
4. Next on my essentials list would be several months of living expenses with at least one month in instant access and another 2-5 somewhere with under 30 days notice. It doesn't necessarily need to be your full take home pay, but it needs to cover bills and food etc. That way you avoid ever needing to be in a debt cycle again. (This is very dependent on how much you earn and spend.)

That would be my essentials list. From the rest I would probably treat myself to a bit of a holiday, and then maybe knock a good chunk off the mortgage - if yours is anything like mine I think I would knock it down 10% a year at a time to avoid the early repayment charges.

If you do that, then you could take thee decreased cost 50-50 between reduced payments and reduced term and use the decrease to start saving for your children maybe? Depends how long you've got left on the mortgage I guess.

I think I'd be careful on the renovations depending on the house value but obviously you do have to live there for another 8 years so you may well want to do a few bits!

Agree about an IFA. But do your homework and look for a good one.

@NoSquirrels has nailed it

No need to give money to an IFA

Some very good advice here, thank you everyone. Will need to think!!!

Pensions have been mentioned a fair few times. I've got a civil service pension. Dh over saves into a private pension.

£20k would cover windows, carpets, flat roof, maybe move the downstairs loo, another £10k for a car big enough for kids and ddog. We were getting quotes for these jobs before this money happened as they are getting quite desperate. Particularly the car, roof, windows.

Need to think more about mortgage vs savings. I think having accessible savings to avoid debt again is a must.

Mortgage has another 30yrs to run.

The actual total inheritance is £139k.

Pension

Yeah just take your time tbh! I’d put chunk of it in a cash ISA tbh to gain some interest on it

Debt, car, windows!

I wouldn’t chuck it off the mortgage right now tbh - maybe remortgage are the end of your next fixed term?? Use some of it to top your deposit up a bit and get a better shorter term mortgage at that stage perhaps??

I don’t think I’d be keeping any of this money aside for the kids house deposits tbh - would be more focused on getting yourselves sorted first / shortening the amount of years you have your mortgage for (getting debt free totally first)

Then start saving some money for the kids :)

Obviously your choice though :)

Congrats on the inheritance!

This one's really easy do the bits you said you need. Keep 6 months cash accessible like premium bonds. Do not pay off your mortgage. Rates are super low. We actually just took every penny out of our house at 1.5pc and invested it. Earning way way more than that but we work in finance. If you don't know how to invest get someone to help you. Now is an amazing time with shares being so low due to the virus. Serious money to be made if you know how safely.

How big is your current mortgage?

Use it to pay off your mortgage but keep paying what you are now to clear it completely.

When the dcs leave home you can downsize and give them that money then-it will only go to waste getting eaten by inflation in a savings account.

Only spend in the house what will increase its value.

No car- just get what you can afford on your current outgoings (plus what you save on no longer paying £6k debt).

Sounds like you’re OK on the pensions, then. The advice for pensions first is because a) mortgage borrowing is cheap - assuming you have a decent rate? - and b) the longer you can leave money to grow the better, so it will give the best long-term return.

Have a play with an overpayment calculator for the mortgage. I’d probably do a bit of regular overpaying to reduce the term if my mortgage was over 30 years.

You definitely need a chunk of easily accessible emergency cash, whatever else you do.

If in doubt past that, split the longer-term savings between paying off mortgage and S&S ISA.

They key thing, as BackForGood says, is not to get used to a different lifestyle but make sure the money works hard for you as you won’t get the opportunity again.

Interest levels are so low for savings at the moment.
What's your mortgage rate & repayment terms? It may not be worth the interest savings if there is an early repaying charge.
House repairs are necessary and will bring other savings with heating efficiency etc as well.
Pensions can be good but particularly as they can be really tax efficient which is probably why IFA's often recommend them!

Go slow. Learn about investing.
There are many good podcasts and youtube videos from UK based financial advisers on all sort of things to do with investing... choosing funds, choosing platforms.

I would pay off debt and have an emergency fund of 6 months or more of expenses (we are in a global pandemic).
I would open a Stocks & Shares JISA for each child and put £9k in each this tax year - a global passive fund would be good to start with. You can always change it later.

Then I would park the money and think about what needs to be done to the home urgently and what can wait. If you will sell the home soon then consider what needs to be put in to fixing it up without spending too much.

Some good podcasts/youtube channels:
Meaningful Money - www.meaningfulmoney.tv
Money To The Masses
In Her Financial Shoes

Lots of people are saying premium bonds, they pay out next to nothing, you have to be very lucky to get anything these days. 2% on a 25 year mortgage you are paying half again, so 200k is 300k of repayments, I'd be very tempted, after debts and car, to clear a chunk and keep paying your current amount and you'll clear it quite quickly.

Premium bonds are being recommended for the easy-access emergency fund savings, not as a substitute for longer-term stuff such as mortgage etc. You need to keep your easy-access money somewhere, and premium bonds are not a terrible place to keep them - comparable to many easily accessible savings vehicles. Obviously wouldn’t be the place for the whole £100K.