You'e just recieved £175k...

SavvySaver24

What do you do with it!?
I'm incredibly fortunate to have inherited £175k, though obviously the circumstances are awful.
I have NO idea where to start. Please give me all your views on how I should save/spend/invest the money.

A few facts about me first:
- I jointly own a house with a partner. We easily afford the mortgage each month and I don't want to use the money to pay off the mortgage as whilst I see no doubts about our future, this money is "mine" and the house is joint.
- I have no other debts (student loan aside)
- I earn £50k a year and am happy in my job, with no desire to leave.
- I have £25k in my own personal savings currently.

In 2 to 5 years we may look to move at which point I would consider contributing £85 to £100k of my inheritance to the next house if it meant we could afford our 'forever' home.

But I the meantime where should I look to out the money? Bonds? ISAs? General savings accounts? I already plan to split it across multiple banks but any other advice much appreciated.

Steve182

But I the meantime where should I look to out the money? Bonds? ISAs? General savings accounts? I already plan to split it across multiple banks but any other advice much appreciated.

So no desire to invest any to make it grow relative to inflation?

MX5huggy

How old are you? Will you have the money this tax year, lock in to this years ISA allowance before April with £20k (simple cash for now). Then another £20k after April, I would do the same with my wife’s allowances as well. 

Then £50k of Premium Bonds each. Then breath. 

Then 2 to 5 years is a bit short term for stocks and shares. 

Where’s your pension at? 

maxsteam

You should consider putting the maximum £50k into premium bonds while you investigate other options. I would also suggest investing a few pounds into reputable publications. If you have not invested in shares before, you should tread cautiously.

bownyboy

 Do you have a pension? if so what have you contributed this year or previous years?

Do you have an emergency fund?
Do you have dependents?
Have you ever invested money in index funds before?
As others have said if you need access to £85k to £100k in 2-5 years then you need to understand your appetite for risk which will determine if you put that in cash accounts / premium bonds or investments such as index funds.

steampowered

The main options are:
1) Pension
2) Stocks & Shares ISA
3) Regular stocks & shares investments
4) Overpaying the mortgage
5) Cash savings accounts or premium bonds

Those options are ordered from "most profitable" to "least profitable".

It is not a good idea to keep this money in savings accounts for a long period of time. By all means do that while you work out what to do, but for goodness sake don't leave the money in savings accounts indefinitely. If you do that it is going to lose value over time due to inflation. The UK's inflation target is 2%. 2% of £175k is £3.5k per year. So if you leave the money in the bank getting hardly any interest, think of that as losing £3.5k per year. 

It is worth spending the time to educate yourself about the basics of investing. Any money which you intend to have for more than 5-10 years should really be invested.

Open a stocks & shares ISA, and invest the maximum amount possible (£20k each tax year) into it. Buy a low cost, diversified stock market fund - such as a Vanguard fund (other fund providers are available). That's going to get you a good return - the average return generated by the stock markets over the past few decades is 7-8% per year - over a long time period that's a pretty safe bet. 

You could also consider boosting your pension contributions, and using some of this money to pay for that. The benefit of pension contributions is that you get investment returns (i.e. 7-8% per year) AND you get tax relief, which boosts the value of what you put in by an extra 20% for basic rate taxpayers or 40% for higher rate taxpayers.

SavvySaver24

MX5huggy said:

How old are you? Will you have the money this tax year, lock in to this years ISA allowance before April with £20k (simple cash for now). Then another £20k after April, I would do the same with my wife’s allowances as well. 

Then £50k of Premium Bonds each. Then breath. 

Then 2 to 5 years is a bit short term for stocks and shares. 

Where’s your pension at? 

30. I'm nearly at my tax free limit on my ISA for the year (will be after my March pay). Bur thinking of giving my partner £20k to put in an ISA (he doesn't currently have one).
Pension is a good call, I don't actually pay much attention to it.... I don't pay into it but my employer pays in 12% od salary.

SavvySaver24

maxsteam said:

You should consider putting the maximum £50k into premium bonds while you investigate other options. I would also suggest investing a few pounds into reputable publications. If you have not invested in shares before, you should tread cautiously.

I feel I don't know enough about stocks and shares so wary about that but will look into Premium bonds - can you access the money in them whenever and as often as you want?

SavvySaver24

bownyboy said:

 Do you have a pension? if so what have you contributed this year or previous years?

Do you have an emergency fund?
Do you have dependents?
Have you ever invested money in index funds before?
As others have said if you need access to £85k to £100k in 2-5 years then you need to understand your appetite for risk which will determine if you put that in cash accounts / premium bonds or investments such as index funds.

I'd call my emergency fund the £25k savings but we also jointly have £1/k in savings for house emergencies. No dependants. I've never invested before no, at this stage I'd probably say I'm more risk averse - I'd rather the money was safe even if that means it doesn't make much vs. risking it.

SavvySaver24

steampowered said:

The main options are:
1) Pension
2) Stocks & Shares ISA
3) Regular stocks & shares investments
4) Overpaying the mortgage
5) Cash savings accounts or premium bonds

Those options are ordered from "most profitable" to "least profitable".

It is not a good idea to keep this money in savings accounts for a long period of time. By all means do that while you work out what to do, but for goodness sake don't leave the money in savings accounts indefinitely. If you do that it is going to lose value over time due to inflation. The UK's inflation target is 2%. 2% of £175k is £3.5k per year. So if you leave the money in the bank getting hardly any interest, think of that as losing £3.5k per year. 

It is worth spending the time to educate yourself about the basics of investing. Any money which you intend to have for more than 5-10 years should really be invested.

Open a stocks & shares ISA, and invest the maximum amount possible (£20k each tax year) into it. Buy a low cost, diversified stock market fund - such as a Vanguard fund (other fund providers are available). That's going to get you a good return - the average return generated by the stock markets over the past few decades is 7-8% per year - over a long time period that's a pretty safe bet. 

You could also consider boosting your pension contributions, and using some of this money to pay for that. The benefit of pension contributions is that you get investment returns (i.e. 7-8% per year) AND you get tax relief, which boosts the value of what you put in by an extra 20% for basic rate taxpayers or 40% for higher rate taxpayers.

Thanks for this. I know I am woefully uneducated about investing, I'm just not sure where to start. With the Stocks and Shares ISA, can you have one of those and put £20k in tax free in addition to a regular ISA. Or is it either or?

csgohan4

Pension is a must for you, especially as you don't put in money for it. I would suggest looking into what your pension fund invests in and if you could do better either DIY or IFA. Ignorance will cost you when you retire