What would you do with inheritance

[TwinklingPotato]

Hello.

In the next couple of weeks or so, I will receive some inheritance from my grandmother. It's not "life-changing", but it's not bad, either - £28k.

I have two credit cards and a loan that I will clear, which will leave me with around £23k.

It's been a crappy but positive year, I've left an awful relationship and am renting a lovely home. I don't want to splurge this money away, as I'm aware how quickly it could disappear, so was thinking of sticking £20k away somewhere and keeping what's left after I pay my creditors for a few treats for me.

I mean, I could do with a newer car, but mine still runs and gets through the MOT, so I think I'll stick with it for a while..!

What do you think?

Sounds like a perfect amount to put in an ISA as the annual limit is £20k

How old are you? Could you use it for a deposit on a house at some point? If you're young enough you could put it into a LISA which you will get government contributions towards. If you are not paying credit cards or loans anymore could you continue to save that money you would have spent on those things towards a deposit?

If you are renting I would save £20k towards a deposit on a property.
£3k to make life a bit nicer

If you are renting I would save £20k towards a deposit on a property.
£3k to make life a bit nicer

Thanks, all.

I had thought about a deposit on somewhere. I'm 40, and not sure if this is where I want to live indefinitely yet, but it's a consideration, certainly!

Will be adding to it with my credit card and loan repayments, too - paying into savings rather than to them..

I'd stick it in a stocks and shares isa. Not a lifetime isa unless you think there's a realistic chance that you will buy a house in the near future.

Thanks, I think I'm too old now for a LISA anyway... Is there a huge risk though with stocks and shares ISAs?

Worth making an appointment with my bank, perhaps?

I think LISAs have to be opened before you're 40 but you could still save into a normal ISA. If you're unsure where you fancy living permanently I would still save towards a deposit so you're ready to go when you decide. Most banks will let you have a mortgage up to retirement age, so 67/68ish so if you save for the next few years you should still be able to get a 20-25 year mortgage pretty easily. Money saving expert is very good for choosing the best savings accounts so I would go have a look there before committing to one
Nothing wrong with renting but especially if it's private renting it's nice to have the option to buy if you're served notice or rental payments jump up. And the obvious perk of not having to pay rent after retirement if you own, obviously you'll need to pay for maintaining the property but it shouldn't be as expensive as renting

Yes sounds an ideal plan, pay off debts, £20k into savings then a few treats with the remainder. Although I would actually keep some of the £20k savings in a more accessible account as an emergency fund so you don't go back into debt if your car breaks down or other emergency expense. The best way to maximize your return with an ISA is either stocks and shares (not self-selection, choose a managed portfolio with balanced risk level) or a cash ISA with a good fixed interest rate. Both of these tend to want you to lock your money away for a period and have penalties for too many or early withdrawals hence keeping some back in an easy access account for emergencies (should still be a savings account with an interest rate, not a current account or muddled in with your day to day spending, check money saving expert for current best buys).

Then reset finances so you're saving a good amount each month - I'd split between looking at increasing your pension fund (have you a workplace pension and do you have the option to make additional contributions), a fund for a potential house deposit or moving costs and a shorter term car replacement fund, and split your savings/accounts accordingly.

without sounding like a knob, I doubt your bank will be interested in an appointment with a £20k investment.

I'd use trading 212, stick it in a cash isa for now and keep track of the stock market for a bit and when you feel more comfortable - move it across into the stocks and shares isa. With platforms like trading 212 you can often move it back and forth as long as you do it in the right way. I play with mine very regularly.

Yes there is always a risk with any investment.

The other option is to put it into your pension which is tax efficient.

I would only invest if you have more than 6 months salary in savings after you have cleared your debts. The stock market has just had a good run and is due a correction. If there is a chance you will need the money in the next 5 years it is not worth the risk. Put it in a cash isa at the highest rate you can find.

An ISA sounds like a very good idea and you can put it into eg a short term money market fund which is effectively no risk (or ultra low). Once you know whether you’re likely to want to the money in the short-medium term you can decide whether to think about equities- yes they come with risk but over 5-10y that risk is very low (you just accept that shares are volatile and wait it out). The real risk is buying shares then finding you need to sell them at short notice and end up selling at a loss.

Sounds life changing amount It would be good use of it to use in buying a home

There is a level of risk with any investment but stocks and shares don't have to be any more risky than cash, you just need to choose carefully. The major platforms all have the functionality to do a risk assessment questionnaire and recommend you a fund or bundle accordingly. The thing to remember is that if you want to access the money in the medium term i.e. next year or so, and/or you might need it very quickly i.e. With 48 or 72 hours notice, stocks and shares are not the way to go as there can be short term market fluctuation and it takes a few days to sell your shares, clear the money as cash into the account then withdraw it to your current account. That's why I'd say keep some back as cash somewhere accessible.

Your bank might be able to help but honestly I'd start with money saving expert as there's such good advice there...

Do you have an emergency fund?

If not work out what 3 to 6 months of the most pared back, basic living costs are and put that amount in a savings account or cash isa. (if you have children, are single or have a unstable job, save 6 months. If you have no dependents and a stable job, 3 months is OK). You should look to get about 4% interest on that account

You don't want to end up having to use expensive credit cards/loans when your car breaks down or the washing machine packs in

Then open a stocks and shares isa with the remainder.

Definitely pay off the debt. I wouldn’t be investing that £23k which is leftover, not when you’re privately renting, 40 and single. Put it towards a mortgage deposit to get yourself on the property ladder asap.

Thanks so much everyone!

@user927464 that made me laugh out loud! I just meant to see what products they would recommend, I'm certainly not a wealth customer, if only!

Now, don't all come for me at once, but.... I don't have a pension. A part of my previous relationship was financial control and not "throwing money into pension pots". So, perhaps I could set up a pension pot?

I'm not all that fussed about being a homeowner, rightly or wrongly, but I suppose I could consider it.

I'm in a stable job, good income now and just me to look after, so I'm ok otherwise.

No pension fund?? [clutches pearls] [flames OP for financial irresponsibility].

No seriously, life shit happens, 40 isn't too late to start at all but really you must start saving towards a pension as a priority. Abusive ex is an idiot to view a pension scheme as throwing money away. If you are employed you are really throwing money away by not doing it, as your employer has, by law, to make contributions on your behalf if you invest into a workplace pension scheme but you don't get that money back (usually) in your pocket if you opt out. Plus if you are a tax payer you are losing the tax benefit by taking that money as salary rather than cash and again you don't get that back. It may not be much, but as a first step opt in to your workplace pension scheme, or if you are self-employed or similar start a private pension ASAP (you might want to do that as well as your workplace pension if employed, or depending on the terms look at upping your contributions beyond the minimum).

Do you have a workplace pension?

No, I opted out. always have done.

I've worked for a Higher Education Institution for a decade, and am now in the USS salary bracket, but have never opted in. I can do though, from January (I think there's an annual opt-in or opt-out date, I'll check). My only hesitation right now is not knowing if I'm staying here or moving elsewhere in the near future, but it will be a priority - over saving for a deposit?

Jump on the work pension now in that case, but I would keep the savings separately. Hopefully you won't feel the pension contributions if you're not longer paying the credit cards and loans. But save any extra that you can. You may not be fussed about being a property owner, but if the car breaks down and would be uneconomical to repair, you've got your savings to buy another, if you're served notice on your property you'll have savings for your next rental deposit and moving costs etc. you've got another 28 years or so before you hit pension age so if you join the pension now, hopefully you'll have a decent pot by then

How do you plan to support yourself when you retire if you don't have a pension?
If you work your employer will have access to a workplace pension scheme which you should start contributing to and might be able to put a lump sum in. Pension would be an absolute priority for me.

S&S ISA and a couple of grand for treats or a holiday.

Please opt back in. Enquire today! Right now!

I would use the inheritance to enable me to make additional regular contributions to the pension as well.

It doesn't matter if you might not stay, you might and you have lost nothing by being in the scheme, even for a short time (unlike not being in the scheme, you have lost masses of employer contributions).

Keep aside 6 months savings first (cash ISA) and if you have any left over, put it in a stocks and shares ISA. No need to work out investments yourselves, both Vanguard and Fidelity have good index fund options which spread the risk across stocks (higher risk) and bonds (lower risk) via fund managers who have a better idea of what they're doing!

If you read up on compound interest you'll see why stocks and bonds are generally a better option than cash ISAs but cash ISAs are good for the 6 month rainy day money.