Gift of 10k where is best to use it?

firstbuyer

Morning All,
My dad is gifting each of his children 10k, happy days!
I have a mortgage of approx 148k at 2.18%, no other major debt that I'd like to use this to pay off. I do have a help to buy loan which I'm looking at remortgaging and incorporating in 2023 when my 5yr fix ends.
I usually have 1-3k of savings which aren't kept long term (apart from 1.5k in premium bonds) so I've never really had to manage a larger amount. What would you do?

• a. Overpay lump sum into mortgage  (I can OP 10%)

• b. Premium bonds and hope one wins

• c. Savings account (I'll need advice on what one though as they all look a bit naff at the moment)

Thank you!  

xylophone

The amount that you already keep as savings seems very little to cover an emergency - new boiler/roof problems/new white goods say.

Some part of that £10,000 needs to be set aside as am emergency fund?

Notepad_Phil

You might want to add investments onto your list of potential things to use it on.

Personally in your shoes I'd put half into premium bonds (which you can then use as part of your emergency savings) and half into long term investments (by which I mean 10 years at least) held in a S&S ISA.

El_Torro

I agree that increasing the size of your emergency fund is a good idea.

With the rest I would either stick it in the mortgage or your pension. You don’t mention a pension but hopefully you have one. If you don’t then now is a good time to start.

steampowered

Option d - Investments, such as a stocks & shares ISA in a stock market tracker fund.

Learning how to invest is an essential life skill. People who don't learn how to do that are hundreds of thousands of pounds  worse off than those that do. If you've never had money to invest, now could be the time!

I'd definitely want to make sure your LTV will be low enough when your 5 year fix ends to remortgage onto a competitive rate. Beyond that, I'd invest.

Whatever you do, don't put it into premium bonds. That's just losing money to inflation.

eskbanker

steampowered said:

Learning how to invest is an essential life skill.

No it's not!  Putting pensions to one side, obviously those with sufficient surplus money to invest on a discretionary basis will do it better if they learn, so it's arguably essential for that small minority but it's clearly not a universal requirement.  You might just as well argue that learning to skydive is an essential life skill - it certainly is if you're planning to jump out of a plane but the rest of us can adequately get by without....

steampowered said:

People who don't learn how to do that are hundreds of thousands of pounds  worse off than those that do.

What evidence do you cite for this assertion?

colsten

steampowered said:

People who don't learn how to do that are hundreds of thousands of pounds  worse off than those that do. .

I am sure you didn’t mean to suggest that learning how to invest will result in hundreds of thousands, as that would be pure hyperbole. 

We know very little about the OP’s circumstances, apart from them being a mortgagee with a small emergency fund that could quickly be used up. I think the OP would be foolish if they put their £10K into investments at this stage. Instead, keeping it as an emergency fund, possibly in Premium Bonds, seems to be the sensible thing to do. They can still learn about investments, and perhaps review their pension contribution as well as potential financial needs of their family.

Eco_Miser

steampowered said:

Whatever you do, don't put it into premium bonds. That's just losing money to inflation.

Money is lost to inflation wherever it is kept, including stocks.

At least with Premium Bonds there's a chance of returns that will more than compensate for inflation, and the OP really needs to be keeping more emergency cash.

firstbuyer

Woah sorry guys I forgot I posted here! 

OK so to answer some of the q's above

El_Torro said:

I agree that increasing the size of your emergency fund is a good idea.

With the rest I would either stick it in the mortgage or your pension. You don’t mention a pension but hopefully you have one. If you don’t then now is a good time to start.

Pension current pot - 26k (I'm late 20's and I pay £800pm into this inc company matching) my wages have significantly increased in the last 2 years so this number is only finally growing! I wouldn't want to put it in here as I'd like the money to be used eventually to help us move up the property ladder when we can.

xylophone said:

The amount that you already keep as savings seems very little to cover an emergency - new boiler/roof problems/new white goods say.

Some part of that £10,000 needs to be set aside as am emergency fund?

Next month me and partner will be putting £400pm into Premium bonds to start building the 1.5k to 5k as our emergency savings. Luckily we have a brand new boiler, and live in a flat so a lot of the emergency things we have had have been low in cost. But I'm not naive to the fact that we need a bigger pot especially in the current climate.
steampowered said:

Option d - Investments, such as a stocks & shares ISA in a stock market tracker fund.

Learning how to invest is an essential life skill. People who don't learn how to do that are hundreds of thousands of pounds  worse off than those that do. If you've never had money to invest, now could be the time!

I'd definitely want to make sure your LTV will be low enough when your 5 year fix ends to remortgage onto a competitive rate. Beyond that, I'd invest.

Whatever you do, don't put it into premium bonds. That's just losing money to inflation.

I am looking into a S&S ISA now! Our current LTV is 58% but this doesnt include H2B. We're guesstimating we will be at 75%ish when we remortgage to incorporate the H2B which would be more than affordable for now. Less LTV would be nice as better rates.


Thanks all - in reflection it may not be best putting all of my eggs in one basket like I initially thought. I'm going to have a look at some S&S ISAs although a 10yr one may be too long at the moment!

grumiofoundation

Learning how to invest is an essential life skill. People who don't learn how to do that are hundreds of thousands of pounds  worse off than those that do. 

Even if the latter assertion was universally true, which it isn't, this would still not make knowing how to invest  'essential'. 

Eco_Miser

firstbuyer said:

 I'm going to have a look at some S&S ISAs although a 10yr one may be too long at the moment!

I'm not aware of any S&S ISAs with any time limits on them.

While you should plan to keep an investment for at least 5 and preferably more than 10 years, to give them time to grow, you could sell up and withdraw the money almost as soon as you had opened it, probably at a small loss.