How do I earn the most interest on my inheritance?

rgsoton

Hi there

I am due to inherit £50k ish imminently. I am looking to spend (some or all of) the interest earned each month (if this is the sensible thing to do!). Am a total dork when it comes to savings other than the basics. Any advice would be greatly appreciated.

Thanks for your time
PS forgive me if this is in the wrong discussion forum!

Baldur

rgsoton wrote: »

I am looking to spend (some or all of) the interest earned each month (if this is the sensible thing to do!).

If you spend the interest each month, the value of your capital is likely to be eroded by the effects of inflation in a relatively short period of time.

[Deleted User]

As Baldur says if you spend the interest the real value of the original amount will decrease due to inflation. You'll also not benefit from compound inflation which is basically interest on interest you've accrued from previous months.

To put this into context the interest earned on 50k in 1 month in a decent instant access savings account (6.5% AER) would be £211.

Are you looking to save or to invest? By this I mean save = very little risk, invest = a risk level you choose and you'd expect to not touch the money for a minimum of 5 years e.g. stocks and shares.

If you're looking to just save then:

1. In general, ISA's are a good place to start:

http://www.moneysavingexpert.com/sav...gs-without-tax
and http://forums.moneysavingexpert.com/....html?t=401374

2. Regular savings accounts are good too:

http://www.moneysavingexpert.com/sav...vings-accounts
and http://forums.moneysavingexpert.com/....html?t=608697

Regular savings accounts are generally a good place for new money e.g. monthly pay cheques, however if for example you have £3k in a 6% high-interest bank account drip-feeding into a 10% regular savings account then you're essentially getting 8% interest on average for your £3k which beats most fixed rate products - albeit with a bit more work.

3. If you want something with a little less work then fixed rate savings accounts are a good option:

http://www.moneysavingexpert.com/sav...interest#fixed
and http://www.thisismoney.co.uk/saving-...&in_page_id=50

4. One other thing you might like to consider is getting a decent instant access savings account:

http://www.moneysavingexpert.com/sav...st#topaccounts
and http://www.thisismoney.co.uk/saving-...&in_page_id=50

5. This is a decent thread discussing the pro's and con's of NS&I Index Linked Certificates:

http://forums.moneysavingexpert.com/...&highlight=nsi

In general they're more beneficial for higher rate tax payers.

rgsoton

Thanks!
It looks like spending some of it is unavoidable (I think!) as I will have a shortfall of say £200/month (due to loss of benefits) that would have to be met. I will be looking to use it as a deposit for house (not yet!) in maybe 1 to 2 yrs time. I am not looking at adding regularly to the account as have nominal income. thanks