What to do with ~£50k?

[alleycath]

We (OH and I, not yet married but plan to post-Covid) are soon to be in receipt of a big chunk of money, kind of advance inheritance - we're very, very lucky.

We want to ultimately use it as a deposit for a house, but currently we both have debts. The first chunk of this money will pay off all that debt. A little more will go on one of us getting an additional qualification which will be useful for career progression.

As we both have very poor credit right now and also aren't sure where we'd like to settle (due to said career progression), we can't/don't want to buy a house just yet.

The money 'left over' from this windfall after debt repayment and qualification and our first holiday (probably just a week in Spain - nothing fancy haha) in a few years will be roughly £60k. While we work on improving our credit file, saving plenty from our now debt-repayment-free salaries, and deciding where we want to buy a house, what should we do with it?

My gut instinct is to put it somewhere we can't access it at all for a while, like a fixed term ISA, given both of us having poor financial management skills historically (both due to complicated family circumstances and also one due to a breakdown/mental illness). That gives us a chance to build up our own savings from 'scratch' without being able to access it, gives us time to practice spending and saving properly. We're both employed (combined salary of £60k), and qualification will be alongside work, so we can more than afford to do so once our debts are paid.

Is that the best/most sensible plan?

We both come from very, very poor families with historic debt issues, no homeownership, hand to mounth scrimping and we both unwittingly ended up going down the same path. This will be a huge second chance for us to get on the right track and learn better habits, but I am so conscious that I don't have the faintest idea how to do this 'right'.

The person needs specialist advice on deprivation of assets

CHC can be ended.

@Soontobe60 There doesn't need to be cognitive impairment, CHC is determined based on health needs but they can be physical, mental, or a mixture. You could have full mental capacity but be paralysed, for example.

@WobbliHead3000

Have you thought about using some of the money for therapy? I say this as someone who also grew up like you did, and my poor financial habits are linked to my childhood. There have been numerous occasions over the years where I have come into money but have ended up making poor decisions with it. It would be worth it if you were to do some work in addressing your issues with spending/financial mismanagement, and then getting some financial education to make sure you don’t fall back into old habits. It’s not as simple as just being given money and then never doing that again as your behaviours need looking at.

This is probably a great idea, regardless of what happens with this money (some other PPs have pointed out that the relative might not be aware they're not quite as secure as they thought financially, so I think we should hold off planning anything until relative is 100% sure that their savings/pension will cover them until they die even without their current healthcare provision).

It's definitely quite ingrained as a result of my childhood - the second I had access to money as an adult, I had no self-control. Over the years I've improved a lot, but I've also never had a situation like this, where I suddenly have a lot to spend - I really don't want to fuck that up! And it'll be useful to unpack it all and work on changing my mindset anyway for future.

[quote whoamongstus]**@CupboardofJoy* @Soontobe60* - both really useful points, thank you. I didn't know CHC wasn't permanent, they were only awarded it very recently, so I'm going to ask OH to have a chat with relative, their carers and social worker about how to make sure they're covered before anything else.[/quote]
Example; Dementia patients can be very difficult to care for, sometimes showing aggression, and can qualify for CHC. Then as the illness progresses they can cease with the aggression as their body starts shutting down further, so although the illness is getting worse the actual care needs could be easier to manage. CHC could then be reviewed and stopped. At that point the Local Authority might wish to carry out financial assessment and look for possible deprivation of assets.

@whoamongstus it’s interesting that your poor childhood lead you to spend wildly when you have it. I had a v poor childhood but I have ended up the other way and never bloody spend it. I am in permanent make do and mend mode, even tho I have a decent savings account. Hubby is opposite and sometimes I do get pissed off he is spending all our hard earned cash, not me!

We have CHC for an elderly relative, they don’t have cognitive impairment. It rarely gets removed, most people with it are getting progressively worse due to their condition.
To answer your actual question OP, I’d put it somewhere you can’t touch it until you are in a position to buy a house.
Do not squander it - get married and put it into property as soon as you can

Thanks @Oly4, also useful to know - my grandma died before having her CHC reviewed so I didn't know it could be removed. Sadly, due to OH's grandparent's age and conditions, it's not likely that they will be around for very much longer, but we certainly don't want them to be in a position where they couldn't afford the amazing care they're getting now so it's definitely a conversation OH should have with them and their care team.

But assuming that nothing changes with the currently 'plan', you're right - and that's what we hope to do. Get married whenever we can do so without infecting anyone with a virus, buy a house somewhere as soon as we can do so. We don't need or want a big house, we're not planning any children, so hopefully - if we can move to one of the areas we'd like, which are much cheaper to buy than where we currently are renting - if we had that money it'd be a decent deposit (comfortably 20%, possibly more in some areas we're looking at), especially if we continue to save to top it up in the mean time!

I'd look at putting the money into a bond account, absolutely no access to the money unless you die.

For boosting credit I'd def recommend a credit card but don't pay it off in full... It needs to have money owing to boost credit. I use mine for fuel as I claim this back so there is always a balance owed (£150ish) a month.

Presumably you both have mobile contracts?

@combatbarbie

I'd look at putting the money into a bond account, absolutely no access to the money unless you die.

For boosting credit I'd def recommend a credit card but don't pay it off in full... It needs to have money owing to boost credit. I use mine for fuel as I claim this back so there is always a balance owed (£150ish) a month.

Presumably you both have mobile contracts?

For boosting credit I'd def recommend a credit card but don't pay it off in full... It needs to have money owing to boost credit

This is the kind of thing I didn't know - really useful, thank you!

We both have mobile contracts, yeah :)

Oh yes to build credit you need to use credit. Get a joint credit card that you put say £200 worth of things on a month then pay off most of it each month.
The terrible thing with credit cards is it’s so easy to get into debt by just adding a bit here and there. Vow to each other that you will check the statements together to ensure the other one isn’t running up debt.

Joint credit cards don’t exist. They are issued to one person and they are responsible for the debt. They can have other cards issued to other individuals (partners/children). As the funds are being given to the boyfriend I would not pay any debts off until financial advice has been taken and properly signed off so he is aware of possible implications that could arise from the death of the relative. Then make a decision.

[quote CupboardOfJoy]@Soontobe60 There doesn't need to be cognitive impairment, CHC is determined based on health needs but they can be physical, mental, or a mixture. You could have full mental capacity but be paralysed, for example. [/quote]
Ah, of course!

@Oly4

Oh yes to build credit you need to use credit. Get a joint credit card that you put say £200 worth of things on a month then pay off most of it each month. The terrible thing with credit cards is it’s so easy to get into debt by just adding a bit here and there. Vow to each other that you will check the statements together to ensure the other one isn’t running up debt.

My friend did this - she used a CC for petrol only and set it up yo pay off in full every month - many are set to minimum payments by default. It boosted her credit rating significantly as it showed she regularly paid it. The cars was high interest, but as she paid in full she never paid any interest.

For boosting credit I'd def recommend a credit card but don't pay it off in full... It needs to have money owing to boost credit. I use mine for fuel as I claim this back so there is always a balance owed (£150ish) a month

This is untrue and will just cost you interest unnecessarily.

As FTBs, providing you are under 40, you need to investigate Lifetime ISAs as you get the money you save topped up by the government.

Otherwise, ISAs are unnecessary at the moment, because the personal savings allowances mean that almost no-one pays interest.

The best thing to do is have a look on moneysavingexpert. Look for the improve your credit rating, first time buyers and savings guides.

Also get the weekly email for regular hints and tips about managing your money.

With the savings, after the LISA money, I'd put it into premium bonds, because over a year or two you're likely to get at least as much as you'd get from any instant access savings account, similar to a fixed term product and maybe you'll get even more. You can get the money back in a few days, but it's a bit of a faff, so there is a little of a barrier to 'accidentally' spending it.

@BarbaraofSeville my credit rating was rather poor a few years ago despite having a credit card etc that I paid off monthly, when I enquired into it the bank said because I show no liability as I had no "debt". I now leave a nominal amount on it (as my expenses are paid in arrears anyway) and my credit score is the highest it can be now. I'm not telling her to max out the card....

Well my credit rating is also very good and I haven't paid a penny in credit card interest for decades, because I pay it off in full every month.

If you don't pay off all of your balance, you lose the interest free period and pay interest on the whole balance, even if you pay most of it off.

I don't pay interest, it's a 0% card for purchases. Maybe you already had a decent score via mortgage etc. I'm just stating my experience..... Not everyone is the same.

Fair enough, but most cards aren't 0% or are for a limited period only, so you should include that as a caveat in your advice.