What to do with a lump sum?

Jaypee630

Hi,

First post here as have just registered for some advice.

I'm about to get a lump sum of £35,000. I have a cash ISA that's full for this year. I don't have any other savings, nor a house as I rent very cheaply at the moment - although am keen to buy in a few years. I have no debts and live cheaply and earn enough to get buy day-to-day.

What should I do with the sum? Is it best to just put it in a savings account and then slowly transfer it year by year to my ISA, or maybe get a shares ISA?

I'm wanting to be careful with it as it's the only lump sum I'm ever going to get or be able to save! Any suggestions?

Thanks, JP

Archi_Bald

Best place for short and medium term savings are Regular Savers and Current accounts these days.

If you spend a little time browsing the forum, you will find plenty of information about the currently available products.

Jaypee630

Thanks. Yes, will do some reading. Does opening a good current account and then annually transferring money to an ISA sound like a reasonably sensible plan?

JP

Archi_Bald

Might be - though if you are certain that you will be spending the money in the next few years, you would very likely make more from current accounts than from cash ISAs. We do live in strange financial times.

Oh, and you'd need more than one current account to maximise your interest potential.

Jaypee630

What do you mean I'd need more than 1 current account? (Apologies for the probably obvious questions - the whole world of finance is new to me!)

JP

Archi_Bald

They all have upper limits for the amounts they pay interest on. You can have as much as you like in the account, but interest is only paid on the first £x.

e.g.
Flexdirect - max £2.5K
123 - max £20K
Vantages and Enhances - max £5K
Current Direct - max £3K

So the least you'd need for £35K is 2 current accounts.

Jaypee630

Thanks very much. From those figures I might need 3. What's the best link on here to read about them all on? It's not easy to navigate about the site I'm finding.

JP

Eponym

jacobwilson8 wrote: »

Always try investing when you have a lump sum because it will help you in gaining a income source from where you are investing always invest in Real Estate as the ROI is great, and if you are getting a good interest rate from any Financial Organization or banks then you may also opt for that.

Investing the money is very irresponsible advice.

The OP does not want an income from it (or if he/she does, they haven't said as much). From the first post it seems likely that the OP intends to use this as a house deposit in a few years, so investing it would be very foolhardy.

brasso

Eponym wrote: »

Investing the money is very irresponsible advice.

The OP does not want an income from it (or if he/she does, they haven't said as much). From the first post it seems likely that the OP intends to use this as a house deposit in a few years, so investing it would be very foolhardy.

I disagree that investing is irresponsible advice for the long term. It depends entirely on a number of factors that the OP has not detailed.

Investing isn't necessarily high risk, and over a longish period is very likely to show a return greater than sticking it in a bank account. With interest rates roughly the same level as inflation, putting cash in the bank is nothing more than a reasonable means of preserving the value of your capital (if you know you'll need it in the short term).

If you actually want the pot to grow, then I'd argue that 35K is a very decent sum to spread across a diversified range of asset classes. As long as you have at least 5-10 years then that is very likely to beat the bank hands down.

Eponym

brasso wrote: »

I disagree that investing is irresponsible advice for the long term. It depends entirely on a number of factors that the OP has not detailed.

Investing isn't necessarily high risk, and over a longish period is very likely to show a return greater than sticking it in a bank account. With interest rates roughly the same level as inflation, putting cash in the bank is nothing more than a reasonable means of preserving the value of your capital (if you know you'll need it in the short term).

If you actually want the pot to grow, then I'd argue that 35K is a very decent sum to spread across a diversified range of asset classes. As long as you have at least 5-10 years then that is very likely to beat the bank hands down.

Looking back at the original post I see now that he/she does mention possibly getting a S+S ISA. I must have read it quickly because I thought the implication was that it was going to be used for a house deposit, but on re-reading, that's not necessarily the case. Apologies jacobwilson8.

brcl1519

Always try investing when you have a lump sum because it will help you in gaining a income source from where you are investing always invest in Real Estate as the ROI is great, and if you are getting a good interest rate from any Financial Organization or banks then you may also opt for that.