£20k - fixed rate savings / premium bonds / other ideas?

eizzil99

I was fortunate to inherit a decent sum of money this year, the majority of which has gone towards the deposit for my first home and I'm now left with around £20k that I had initially planned to put in a fixed rate saver for a few years (pre COVID idea!) - now all of the interest rates have been slashed, I'm not entirely sure what to do with it. I don't want to pump it into the house as the mortgage offer has come through and I'm close to exchanging. Where would be a sensible place to put it? I'm not in any particular rush to access it, although I am conscious that if I put it in a fixed rate for say 5 years, the rates could pick up. Any advice welcome! 

fiisch

Do you already have an emergency fund?  I.e.:  If you lost your job tomorrow, how long could you pay the mortgage/cover your bills?

General rule of thumb for "spare" cash:
- Savings (3-6 months of emergency savings to cover worst-case);
- Pension - are you taking advantage of employer matched contributions / do you have sufficient retirement contributions;
- Overpay mortgage OR invest in a stocks & shares ISAs, depending on your risk tolerance, and what your Loan-To-Value is for the property your purchasing.

S&S ISA is probably the way to go if you have all the other bases covered (personally, I choose 25/75 split with spare cash on overpaying mortgage and S&S investment).  However, to invest needs time from you to learn about the market, a tolerance to risk i.e.: you could see the £20k fall in value, and effort in keeping tabs.  

If it's pure inheritance, and you're just starting on the property ladder, the probable most sensible option is to overpay your new mortgage, but without knowing more info and your tolerance to risk it is difficult to say.

eizzil99

Yep I have an emergency fund, which I add to each month. Pension - I am on the max value contribution value currently. My LTV is 80%. I will look into stocks, thanks!
fiisch said:

Do you already have an emergency fund?  I.e.:  If you lost your job tomorrow, how long could you pay the mortgage/cover your bills?

General rule of thumb for "spare" cash:
- Savings (3-6 months of emergency savings to cover worst-case);
- Pension - are you taking advantage of employer matched contributions / do you have sufficient retirement contributions;
- Overpay mortgage OR invest in a stocks & shares ISAs, depending on your risk tolerance, and what your Loan-To-Value is for the property your purchasing.

S&S ISA is probably the way to go if you have all the other bases covered (personally, I choose 25/75 split with spare cash on overpaying mortgage and S&S investment).  However, to invest needs time from you to learn about the market, a tolerance to risk i.e.: you could see the £20k fall in value, and effort in keeping tabs.  

If it's pure investment, and you're just starting on the property ladder, the probable most sensible option is to overpay your new mortgage, but without knowing more info and your tolerance to risk it is difficult to say.

83705628

If you don't have much else saved then NS&I Income Bonds or Premium Bonds for now. Learn about investing properly but don't rush in, there's plenty of material out there for education, I highly recommend The Little Book of Common Sense Investing by Jack Bogle although it is written by and for Americans.

Unfortunately there's a few people on the forum who keep posting about gold or Bitcoin. I keep calling them out and posting to correct them and warn people and they keep reporting me for spam. Ignore anyone who tells you to buy gold or bitcoin.

eizzil99

Thanks for the recommendation - I will take a look!
Yes I'm certainly not going anywhere near Bitcoin  tcallaghan93 said:

If you don't have much else saved then NS&I Income Bonds or Premium Bonds for now. Learn about investing properly but don't rush in, there's plenty of material out there for education, I highly recommend The Little Book of Common Sense Investing by Jack Bogle although it is written by and for Americans.

Unfortunately there's a few people on the forum who keep posting about hold or Bitcoin. I keep calling them out and posting to correct them and they keep reporting me for spam. Ignore anyone who tells you to buy gold or bitcoin.

steampowered

A stocks & shares ISA is the obvious way to go, if you think you might be looking at a timeframe of more than 5 years.

Obviously stocks are not entirely risk free but the likely returns outweigh the risk. The average return generated by stocks & shares historically is around the 7-8% mark, though most assume that will be 6-7% in future, so a diversified investment fund is a very good bet.

Albermarle

steampowered said:

A stocks & shares ISA is the obvious way to go, if you think you might be looking at a timeframe of more than 5 years.

Obviously stocks are not entirely risk free but the likely returns outweigh the risk. The average return generated by stocks & shares historically is around the 7-8% mark, though most assume that will be 6-7% in future, so a diversified investment fund is a very good bet.

Just to add to this , the figures mentioned relate to investments being held ideally for 10 years ( 5 years being a minimum ) , as this should iron out short/medium term volatility in the markets . Also the growth rate will depend on how high the % of equity in the investments .

83705628

steampowered said:

A stocks & shares ISA is the obvious way to go, if you think you might be looking at a timeframe of more than 5 years.

Obviously stocks are not entirely risk free but the likely returns outweigh the risk. The average return generated by stocks & shares historically is around the 7-8% mark, though most assume that will be 6-7% in future, so a diversified investment fund is a very good bet.

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*over the very long-term, and you have to think at least in terms of decades. And there's no need to rush into investing. Yes nothing compares with the returns but read the guides on here, monevator's a good website too.