House sale due to divorce, how to invest?

allfreys

Hi, please could someone point me in the right direction?

I have to sell my home due to a divorce and will have a lump sum of approx £50k. i want to invest a large portion of this for my childrens future, I am a single parent to three young kids.

I work part time and the chances of me getting another mortgage are minimal due to limited earnings. I also claim tax credits.

I don't really understand investments etc and short of putting the cash under my floorboards I am lost!

Should i speak to an IFA as I am also clueless when it comes to tax etc on savings.

Any advice would be gratefully received.

zzzLazyDaisy

I am sure someone will be along soon who can advise you in more detail than I can. But as a start...

If your money is in a savings account with a bank, then any tax on the interest will be deducted at source (ie by the bank) so you don't need to do anything about paying tax.

As far as tax credits are concerned, your savings are not counted, but any taxable interest from the savings is counted as income, apart from the first £300, which is disregarded.

If you have savings in non-taxable accounts, such as an ISA, premium bonds, or NS&I Index linked accounts, the interest is not taxable and is not counted for tax credit purposes.

I can't comment on the situation with stocks and shares, other than to suggest that you see an Independent Financial Adviser (ie NOT an adviser tied to a particular financial institution).

Lokolo

How long could you tie up the savings for? (i.e. how old are the kids!)

Would you be willing to risk any of the money? (even if its not all, any of it)

Have you worked out whether you can afford to live alone? (sorry to be the depressive!) Just to make sure you will or will not need this money to help.

Farway

You speak of invest, then go on to talk about "tax on savings"

As it is for your children's future do you mean invest in shares etc or save as in building society?

Also as it is for children's future, what would be you attitude to risk? Presumably you would be very unhappy if your 50k was worth 30k in ten years time, shares go down as well as up, and time is not always the solution, ask any Bank of Scotland investor for instance

I suspect cash savings would be safest option for your children's future, and doubt an IFA would tell you that

allfreys

Hey, thanks for such quick responses!

My kids are aged 10, 7 & 4, they are all now in full time education.

I can afford, just to live on my regular income and have already factored in an emergency pot into the amount.

I suppose what I want to ask is how I secure mine and their future, I know university will be expensive but their father will also save for them.

I don't want to make costly mistakes and would ideally like to have some decent return on the savings I will have.

Lokolo

allfreys wrote: »

Hey, thanks for such quick responses!

My kids are aged 10, 7 & 4, they are all now in full time education.

I can afford, just to live on my regular income and have already factored in an emergency pot into the amount.

I suppose what I want to ask is how I secure mine and their future, I know university will be expensive but their father will also save for them.

I don't want to make costly mistakes and would ideally like to have some decent return on the savings I will have.

I should hope so at those ages!

Ok so you say you don't want costly mistakes.

Could you put some of the money at risk for better returns or would you rather not lose anything but gain less?

For example, you could put the money in some Corporate Bond funds, which are basically a collection of loans which goes out to companies, and in return they give back a nice percentage compared to saving rates. But the company can default the loan so the fund loses the money they lent out.

So with theres a risk, but theres a higher reward.

Or you can split up the money into different savings accounts whereby you get a lower interest rate but you don't risk any of the money. So no risk, but you won't get as better reward.

hartcjhart

can you not re-mortgage and pay the ex off with that and keep the house?

allfreys

hartcjhart wrote: »

can you not re-mortgage and pay the ex off with that and keep the house?

Sadly not, the mortgage lender will not allow this due to my low earnings and they will not take into account maintenance as regular income.

allfreys

Lokolo wrote: »

I should hope so at those ages!

Ok so you say you don't want costly mistakes.

Could you put some of the money at risk for better returns or would you rather not lose anything but gain less?

For example, you could put the money in some Corporate Bond funds, which are basically a collection of loans which goes out to companies, and in return they give back a nice percentage compared to saving rates. But the company can default the loan so the fund loses the money they lent out.

So with theres a risk, but theres a higher reward.

Or you can split up the money into different savings accounts whereby you get a lower interest rate but you don't risk any of the money. So no risk, but you won't get as better reward.

I guess could do a bit of both, it would also depend on how long the terms are for both savings accounts and Bond Funds.

My youngest has just gone full time

Where would i find the info on the various savings accounts? I thought they were ones where you had to deposit amounts on a regular basis? Sadly I have not ever been in a position to save money so its all new to me

Voyager2002

Firstly, that lump sum would make a very nice deposit on a new home. That way, you would not need to worry that you might have move if the landlord decided to sell, failed to pay his mortgage, or perhaps increased the rent to an unreasonable level. And staying in the same home long-term is important for children.

Otherwise, I would suggest that you should "invest" the money in your children over the next ten years or so, rather than saving it for university. If they have a good home environment and do well at school, there will always be scholarships and loans to get them through university. However, if they fail to get the 'A' levels needed then no amount of money will get them into a good university.

Lokolo

allfreys wrote: »

I guess could do a bit of both, it would also depend on how long the terms are for both savings accounts and Bond Funds.

My youngest has just gone full time

Where would i find the info on the various savings accounts? I thought they were ones where you had to deposit amounts on a regular basis? Sadly I have not ever been in a position to save money so its all new to me

Number of different savings accounts:

Instant Access
These accounts have a lower rate than most other accounts but you can get access to your money at any point. The rates are almost always variable, and tend to go down over time, so you want to keep an eye on them.

Regular Savers
This is where you put X in an account each month for a fixed interest rate, usually for 12 months. The amounts usually go from £20-£500 each month. Some only allow a maximum of £250 for instance.

Fixed Rate Bonds
Don't get confused with the Bonds Funds I explained above. This is where you get a fixed rate for a fixed period, say 1 year, 2 years, 3 years etc. You usually cannot get access to your money during these periods. But it means you know what interest rate you are getting without needing to check.

Hope this helps a bit!