What would you do with 100k

[Smarshian]

We do not want to move house. Early 30s, 2 DC in nursery, DD due to start school is Sept, DS gets 30 free hours in Sept. currently pay around £1k/month for childcare. I work 4 days and earn around 30k. DH works FT and earns around 45k plus bonuses.
We have a mortgage with 32 years remaining and a balance of around 225k. Nothing we particularly want to spend on, although we may want to upgrade one of the cars soon and in around 2/3 years thinking of a Disney trip.
I have a civil service pension, although have only been there for around 3 months. DH has a great DB pension through work. Both putting in above the minimum.
What to do with the money? Mortgage? Investments? What would you do in our situation.

pay off my mortgage, buy a brand new car and go on holiday

my mortgage isnt huge though. But i would put some in savings for kids too!

@sansou

1.. Put aside £5K for instant access/emergency savings.

1. Maximise your pension contributions for the tax relief this tax year.
2. Fully utilise your ISA allowances of £20K x 2 = £40K for this year.
3. Pay down the mortgage with the remainder.

This.

And because you have put lump sums into savings I'd overpay the mortgage each month.

In your situation I’d pay most of it off the mortgage and keep about £10 back for emergencies.
If I had 100k to invest I’d invest it in property .
You can enjoy your life without having to spend lots of money .

Don’t spend it on an expensive car or holiday !

We had this, although without children.
£90k Pay down the mortgage
£10k Holiday over two years?

£75K off mortgage, reduce the term and keep the payments the same on £150,000. (Consider in the future putting the money you'd earmarked for mortgage overpayments as pension or investment funds)

£25K left.

If you have £4K in 'emergency' savings on a combined salary of £75K, then I think you need to top it up by £16,000. That would mean £20K in an emergency fund, which would be 4-5 months' income replacement if you both lost your jobs. If things pick up pandemic-wise, you can decide to spend these funds if you're feeling like you can bolster them again. But the safety net is so valuable.

£9K left.

The money is coming from early inheritance/ gift. Not sure if that makes a difference?

The only way it makes a difference is if the person gifting it would have an opinion. Some people would be THRILLED with the mortgage reduction, some would want to 'see' the benefit - dream holiday, house improvements etc. Clearly £100K is a massive amount so you should be properly sensible, but if your gifter might like to have a warm glow that's a bit more tangible then you need to factor that in.

So - £9K. What do you want/need/desire?

I'd put £4K minimum to a fab holiday, and I'd use the last £5K to do some repairs/refreshes. I'd also buy 1 special thing to remember someone by.

80 or 90k into the mortgage.
The rest to emergency.

I don’t know if your circumstances makes any difference legally or not - but could the inheritance be protected in case of divorce for the recipient whether that is you or your dh?

It is a lot of money to have to share if it could be protected.

Sorry for being negative.

Mortgage!

Once you have lite left on that you can save and get everything else you wanted !

I would reserve it for the kids education. Given that you are managing £1k per month for childcare at the moment, if you invest the £100k in bonds that will mature in 5 years with a decent return, and when your DC are in full time school put aside into savings the difference between the £1k per month you currently spend on childcare vs the much lower costs of before and after school wraparound care, you would be able to afford either independent senior school for both (if state school options are unsatisfactory) or full payment of university fees and living costs without need of student loan (if they pursue a career with high enough pay that they will trigger repayments). If they end up wanting to pursue a career that means they either don't need/want to go to uni or will never reach the trigger level for repayments of student loan, then give them the lump sum for a house deposit.

Check the terms of your mortgage and any penalties for overpaying. If you can overpay, you usually save money in interest, so its a no brainer unless you have a very low interest rate mortgage and can get better returns elsewhere.

Plus if you're ahead with the mortgage, you can always use money you would have overpaid on the mortgage for other things, like DCs savings for education/house deposits (but do not pay upfront for university unless they're likely to go into an above average paying career as that will be literally money down the drain under the current system).

I'd probably keep around £20k back for a car, holiday and emergency fund if you don't have one. I wouldn't worry too much about making the wrong decisions unless your plan is to spend the money by massively upgrading your lifestyle for a couple of years and spend the money on expensive cars, restaurants, holidays, clothes and beauty treatments, so you have nothing to show for it afterwards.

I would buy a small place somewhere as an investment & rent it out.

I’d put £50k into the mortgage, £5k to each DC (3k isn’t much so would want to bump that up), £15k into a long term USA and the rest for fun/holidays

ISA not USA

Your'e in debt to the tune of £225k. Ok its a cheap debt currently but its a debt. Pay off a big chunk of the mortgage, put some aside for either a nice holiday when thats possible or some home improvements to make life nicer and then carry on as you were.

Why on earth are people suggesting putting any of it in a trust for children or paying for private education when there's a 30+ year mortgage?

Mortgage: 25k
Car: 25k
Holidays funds: 25k
Savings fund: 25k

Also, put it towards the mortgage and reducing the payments will leave you more left over money for holidays and other outings with the children each month.

not buy to let unless you really know what you are doing - very risky (and love that landlord-hating MN always jumps to this suggestion)

there are no high interest accounts and haven't been any for a decade. no savings go anywhere near inflation. You do need at least a year of living costs accessible, put in a savings account as safer than under the mattress but don't expect any interest beyond pennies.

stocks and shares very volatile. Cars on lease etc are pissing money away.

I think pay off as much of the mortgage as you can, keep that big savings cushion, stuff pensions as much as you can.

We were in a similar position and paid off a big chunk of the mortgage.

It meant that by the time our children were teenagers we had a lot more of our monthly income left over so we were able to afford some fantastic holidays with them which wouldn’t have been possible otherwise.

Before spending a penny I'd look very carefully at the legal implications for you and the donor of accepting such a gift. Tax, deprivation of assets, death within seven years etc. And consider how beholden to them you may be. What expectations of you may arise?

But that's just me. Have seen this go wrong a few times,

After your immediate expenses car/holiday put the remaining into pension. You can claim back your income tax on the amount you invest and then get a further yield (conservatively)4-5% at least. Much better than putting into your mortgage.

As a pp has said, be aware that there could be inheritance tax implications if the person gifting the money does not survive for the next seven years. As such you may want to hold part of it back to cover any liability.

For quality of life now, I think I’d probably look to rent (or buy, if possible) somewhere small by the sea to escape to at weekends and school holidays while the kids are young.

You say you have bonus income so would use that for holidays abroad, and then when childcare reduces make regular overpayments on mortgage / investments.

I'd top up your savings to have 3 to 6 months of emergency money (because that's what Martin Lewis says, although he actually says at least six months and three isn't too bad) in an ISA.

Then the rest off the mortgage, significantly reduce the term.

When your childcare bills goes down, I'd still overpay the mortgage, but by less, and use the difference to make your life a bit easier now
and for holidays etc.

You could be mortgage free in ten years, with good money to support your DCs if they decide on uni etc.

@chipsandpeas

75k paid off the mortgage 10K on a holiday to disney keep 15k back for savings/towards home improvements/new car

by paying off the mortgage id reduce the term rather than payments

This!