What would you do with a £100,000 inheritance?
I wrote last year about how one in three working age people in Britain are banking on an inheritance to make everything alright in the future.
But what if you are the recipient of an inheritance?
What if you receive a £100,000 inheritance, to be more precise? What would you do with the money?
This might not be such an unrealistic prospect, as two out of three retirees expect to leave their children a financial inheritance with an average value of £101,818.
According to the latest research from SunLife, 87% of us would save more than half of it.[tweet_box]Most of us would save more than half of a £100k inheritance, rather than spend it all[/tweet_box]
SunLife’s research also found that if we received £100,000 of inheritance, most of us would spend a significant chunk of the cash with more than three quarters of those questioned saying they would spend around £19,568 of the total amount.
Of that £20,000, 72% of people said they would go on holiday, 50% would make home improvements and 40% would buy a new car.
Around a third of those surveyed said they would use the money to repay some debt.[tweet_box]Repaying debt with an inheritance is a sensible strategy to achieve long-term goals[/tweet_box]
On average we would spend around a quarter of the inheritance paying off a mortgage and other debts.
Paying off debts with the proceeds from an inheritance or other windfall is usually a smart move.
In the current low interest rate environment, it can be difficult to receive a net return on savings which exceeds the cost of servicing debt.
Paying off expensive unsecured debt and also knocking down a portion of your outstanding mortgage can also result in peace of mind for the future, and reduces the drag on your ability to meet other financial goals in life.
What is really important when it comes to allocating an inheritance is making sure the money counts towards the future.
Spending or saving the money based on your agreed goals and objectives in your Financial Plan is one great way to avoid regrets once the money has gone.