My inheritance - what to do with it? HELP!

xylophone

We both work for local government and are in their pension.

Would you wish to boost your benefits?

https://www.lgpsmember.org/arm/already-member-extra.php

18cc

as well as financial consideration there are the emotional / comfort / hassle considerations.

some people would thrive on swapping it all around to gain max interest etc, others would value sleeping at night with no hassles and a house that was theirs.

tacpot12

Iwanttosave75 wrote: »

We have approx £1500 in savings at the moment. My issue is that if I pay everything off that I’ll get used to the additional money every month and not save! Not sure whether to lock some away and pay half the mortgage therefore will still have savings for retirement.

Your user name sggests that you want to save, but you seem to know that you will want to spend any extra money. While this is common, the solution is easy. Have a plan for the extra money and implement the plan. Make sure the money goes out of your current account at the earliest opportunity. Then it won't be there for you to spend. Having an emergency fund should mean that you are never tempted to cancel your regular savings/investment and it will just build and build through the miracle of compund interest.

letspretendforaminute

Honestly, you both have well funded government pensions so I'd clear the mortgage and start contribution towards a SIPP dripping the money into funds to average up and down along the way, inexperienced investors would get jumpy and head for the exits if their £120k one week became £110k the next. My own investments reached £173k and dropped as low as £149k before recovering some of those losses to £163k today, overall I'm up 280% in six years.

steampowered

As you do not have an immediate need for the money, in your position I would pay off unsecured debt, then invest the rest into a balanced fund of stocks and shares (e.g. Vanguard), as much as possible through an ISA.

The long term returns on that are going to be far far superior to paying off the mortgage.

As you are both in employment, there is no need to pay off your mortgage early.

If you want to pay off your mortgage to sleep easier at night, that's fine, but there is a financial cost to doing that. It might be cheaper to buy a better mattress.

Flobberchops

If it were me, I would pay off the £9k of debt just out of principle. The mortgage - decide if you want to pay it down, clear it outright, or maybe use your windfall to upsize? It may make sense anyway with growing children, and on the assumption the property will appreciate in value, could be a good long-ish term investment.

Only fair your boys benefit too, if they don't yet have Junior ISAs you can open one a piece and give them up to £4260 this tax year, and potentially the same again each year until they're 18. That would represent a decent way to get tax-free interest or capital gains on their nest-egg, available at 18 for car, university, house deposit etc.

Increasing pension is also a solid idea and I like eskbanker's suggestion of a cash "bond ladder", which prevents the temptation of tinkering with money that's just "sitting around". Metro Bank do some pretty good fixed term savings accounts rates.

redpete

Flobberchops wrote: »

Only fair your boys benefit too, ...

That's a personal choice, not something you should feel 'guilted' into considering. It could well be better for your boys if you are able to use the money in some way that improves family life in the short-medium term rather than putting aside an amount for them in the long term.

londoninvestor

Flobberchops wrote: »

Increasing pension is also a solid idea and I like eskbanker's suggestion of a cash "bond ladder", which prevents the temptation of tinkering with money that's just "sitting around". Metro Bank do some pretty good fixed term savings accounts rates.

I like Metro Bank's customer service and branch experience, but for fixed-term savings their rates are well below the market's best.

e.g. for 1 year you can get 1.70% from Metro compared to over 2% from Charter, Paragon or Atom.

for 3 years Metro pays 2.05% compared to 2.4% from Atom, Tandem or UBI.

sparkiemalarkie

As a mum myself, I would suggest that you put a pot of money aside to 'make some lovely memories'.


sparkie

AnotherJoe

Iwanttosave75 wrote: »

Thanks for that. My mortgage is 2% interest. I can over pay 10% per year but if I pay it off in full it will cost me £547. (0.5% of the balance). The credit cards are all interest free at the moment and the minimum payments come in at £100 per month approx.

Inflation is about 3%. So, in real terms your mortgage drops by 1% every year.

So, dont rush to pay it off with todays money,pay it off with tomorrows devalued money, and put your lump sum in something thats going to pay back much higher, which woudl be (a) ensuring in a few years you dont get caught out by expensive credit card debts, and (b) into your pension which gets an immediate 25% uplift and will also in the long term grow faster than inflation.