Unsure what to do with money received in a will? Read our guide to making the most of that extra cash.
It can be difficult to decide how to spend your inheritance. What you choose to do with the money will depend on the amount you receive and your personal circumstances, but here are some things you should consider:
Be patient
According to the Office for National Statistics, the average inheritance is £11,000, peaking at £33,000 for people approaching retirement.
Try not to rush into a decision. Receiving a windfall can be a blessing but in the case of inheritance, it can be bittersweet. When receiving inheritance due to the loss of a loved one, your emotions and grief could cloud your judgement.
It’s important to take your time. Under the Financial Services Compensation Scheme an inheritance balance of up to £1million is protected for six months, so you don’t have to do anything with it straight away.
Don’t be afraid to ask for help
To ensure you make good financial decisions after receiving unexpected money, it’s a good idea to seek advice. Much can be achieved by careful planning. Our wealth management team can advise you on how best to use your inheritance, taking your personal situation into account.
Pay off any debts
Do you owe any money? A good place to start is by paying off any credit cards or personal loans. Prioritise debts of the smallest value and the ones that are costing you the most interest. A loan or credit card with a high interest rate can feel like a burden, so it should be the first to go.
Savings, investments and paying it forward
When you’ve paid off your debts, aim to put away enough for an emergency fund to cover three to six months of your normal outgoings. At this point, there are countless routes to go down with your remaining windfall, so it’s best to seek professional advice. One option to consider is bolstering your savings, but don’t just assume that you’re best putting it all into Cash ISAs. A good mix of easy-access and fixed-rate savings of between one and five years is generally a good idea.
Any money that you won’t need to access for the next five to ten years could be invested in stocks. There will always be risk involved but diversifying your investments and investing over long time periods can minimise the risk, providing you with some level of protection.
If you don’t need the money and would rather somebody close to you received it instead, a deed of variation can be written up to redirect the gift. Whatever you decide to do, we’d recommend speaking to a professional before deciding. Talk to our team today.