If someone inherits a small sum of money - less than £10,000 - they tend to do just one thing with it. They spend it or save it depending on their personality and circumstances.
But when people inherit a larger amount of money, they usually want to do a bit of both. Especially if it’s not enough to pay off the mortgage.
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So if they need a car, or want a dream holiday or have a child that could do with some help, they prioritise one or two things and take that money out at the start.
The remaining balance then goes into the building society for a rainy day, because they don’t want to waste the opportunity to be safer and better off that the windfall creates.
But there is another way to ensure the inheritance is not wasted, while also paying for a car, a holiday and helping the kids.
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Let’s say you inherit £50,000. You want to spend £10,000 on a car and £5,000 on a holiday and pay of your child’s loan for £8,000.
You would be left with £27,000 to save or invest.
Over 5 years, if left in the building society it would devalue due to inflation and be worth less and less.
If it were sensibly invested in a properly risk-balanced portfolio, it will be worth around £44,000, and can be rebalanced each year to keep growing safely for the long term - with two more years it will be back up to £50,000.
Or if you don’t need a car and so on right now, and you invest all £50,000 it could be worth £82,000 in five years.
At which point you could withdraw up to £5,000 every year and the capital would still be above the original inheritance and able to out grow inflation.
Either way your inheritance forms a hugely powerful financial security for your family over the long term.
The key is to invest it correctly for your risk profile and circumstances, rebalancing it each year to keep it on track with your changing needs.
<<get an inheritance investment plan>>
