What should a 21 year old do with £60,000 ($91,356 USD) inheritance?
"What a lovely position to find yourself in! There's a lot of doors open to you now that may not have opened naturally for another decade. If I were in your shoes (benefiting from the hindsight of being 35 now) at 21 I'd look to do the following two things before doing anything else: 1- Put 6 months worth of living expenses in to a savings account - a rainy day fund. 2- If you have a pension, I'd be contributing enough of my salary to get the company match. Then I'd top up that figure to 15% of gross salary into Stocks & Shares ISAs - with a view to them also being retirement funds. Now for what to do with the rest... Some thoughts first... House: - If you don't want to live in it just yet, I'd think twice about buying. You wouldn't want a house to limit your career mobility. Or prove to not fit your lifestyle within 2 years, costing you money to move on. Travel: - Spending it all on travel would be excessive. Impromptu travel tends to be more interesting on a lower budget. That is, meeting people backpacking and riding trains and buses. Putting a resonable amount in an account to act as a natural budget for this might be wise. Wealth Managers: ""approx. 12% gain over 6 years so far"" equates to about 1.9% annual return. Not even beat inflation over that period - so guessing they had it in ultra-safe ""cash"" (a guaranteed way to lose money over the long term). Give them the money to 'look after' again? I'd sooner do it myself with a selection of low-cost vehicles and equal or beat their return with far lower costs. DECISIONS: A) If you decided not to use the money for big purchases for at least 4-5 years, then you could look to invest it in equities. As you mentioned, a broad basket of high-yielding shares would allow you to get an income and give opportunity for capital growth. -- The yield income could be used for your travel costs. -- Over a few years, you could fill your ISA allowance and realise any capital gains to stay under the annual exemption. Over 4 years or so, it'd all be tax-free. B) If you do want to get a property sooner, then the best bet would to seek out the best interest rates. Current accounts, fixed rate accounts, etc are offering the best interest rates at the moment. Usual places like MoneySavingExpert and SavingsChampion would help you identify them. -- There's nothing wrong with sitting on this money for a couple of years whilst you fid your way with it. It mightn't earn much but you'd likely keep pace with inflation. And you definitely wouldn't lose it or risk it unnecessarily. C) If you wanted to diversify your investment, you could look to buy-to-let (as the other post suggested). This would require a 25% deposit and likely would cost 10% of rental income to have it managed for you. There's room for the property to rise in value and the rent should cover a mortgage. But it may come with the headache of poor tenants or periods of emptiness - so it's not the buy-and-forget that many people assume. With some effort though, it may provide the best route to making the most of the money. D) Some mixture of all of the above at different stages... Your money, your choices. And a valid choice would be to sit on the cash until you learn more about your options and feel the direction your heart is pointing you. Hope that helps. I'm happy to elaborate if you wish. Chris." Myself I am in a similar position. I've had a few good conversations about this with people in the financial services industry.  It all depends how much time you want to spend on yielding your profits and how much risk you would like to take. High time and high risk obviously means higher expected gain, but also has a high chance of creating a loss. Option 1: You could buy a home now and take out a mortgage with a high down payment (thus lower interest rates) and rent it out. By the time you are ready to have your own house, you can decide to either take out a mortgage on your second house and make money off your first house, and keep renting it out. Or you could move in there yourself.  If you use an asset-back mortgage (i'm not sure if that is the term, but a mortgage where in the worst case you give your home back to the bank), you generally carry least risk. If you keep doing this you can have 2 houses paid off if everything goes well. Option 2:  You could also invest in stocks. This all depends on the risk you want to take and the time you want to put in it.  Option 3:  You could also put the money in a savings account. Some banks will give you better interest rates if you lock the money for a set amount of years.  Option 4:  You could buy a foreclosure and try to flip it, though this is very risky and requires a lot of time. Also, it is important to also have some sort of emergency fund, so whatever you do, don't spend all your money.  Save some for a rainy day :-) Hope it helps.. It's important to consider your Investor Profile when deciding the right kind of vehicle for your finances. You are a young guy, with a considerable earned income and no dependents (sorry, this was not clear from the question.) This means that you are able to take a lot of risks that people who also have a family to think about, might not. == high risk tolerance You should definitely not put your money in a Wealth Management fund or Mutual Fund or any other 'hands-off' vehicle. These typically have worse returns than the FTSE itself. Their popularity is due to an amazing marketing job and the fact that people in general want to believe there is an easy way to grow their money. Probably the best vehicle for your money is property, so the first thing you should do with the money is hire a competent accountant and solicitor. "Depending on where you live in the UK, buying a house sooner might be a better option. I would echo the advice about putting some money away into a ""rainy day"" fund etc. above but I know that in my area house prices are going up by around 7% per year. I bought a house two years ago and I'm paying 4% interest on my mortgage so I'm effectively making money by owning my house.  Given that you want to buy a house soonish, if your money sits in an account somewhere making no interest, you're effectively losing 7% of your cash each year by not keeping up with house prices, meaning you'll be able to afford a smaller house with the same money. Do bear in mind though that buying a house costs around £4k in lawyers fees, surveys, mortgage setup fees etc. and selling a house can be more since estate agents will take a % of the sale cost. If you live somewhere where house prices are not increasing as quickly then this will not be as good an option than if you live in e.g. London where house prices are currently skyrocketing. If you don't want to live in the house, you may be able to do a buy-to-let as an investment. Generally the rent will cover the mortgage payments and probably a letting agent/property management company's fees, so while you won't see any actual net income, the people renting will be paying the mortgage off and you'll be building equity on the home. It's not entirely without risk though as tenants can trash homes etc." "The above answers are great. I would only add to the ""rainy day"" part, that even though the cash provides a good cushion, ""a stormy day"" could mean even losing those emergency savings to the unignorable randomness that governs the world economy. Though unlikely, what happened to the russian ruble and the latest decision of the swiss cental bank are just two recent reminders that uncertainty must be treated as a constant. I would therefore advise you to invest some of the money in land capable of agriculture. How expensive is land over there in the UK?" "I assume you've no debt - if you do then pay that off. I'd be tempted to put the money into property.  If you look at property prices over the past 20 years or so, you can see returns can be very good.  I bought a house in 1998 and sold it in 2003 for about 110% of the purchase price.  Disclaimer, past performance is no guarantee of future returns! It's a fairly low risk option, property prices appear to be rising currently and it's always good to get your foot on the housing ladder as quickly as you can as prices can rise to the stage where even those earning quite a good salary cannot afford to buy. Of course you don't have to live in the house, a rental income can be very handy without tying you down too much. There are plenty of places in the UK where £60k will buy you a reasonable property with a rental income of £400-£500, it doens't have to be near where you live currently. Just to put a few more figures in - if you get a house for £50k and rent it for £400 a month (perfectly feasible where I live) then that's very close to a 10% return year on year.  Plus any gains made by the price of the house. The main downside is you won't have easy access to the money and you will have to look after a tenant if you decide to rent it out.  Also if you do buy a property make sure it is in a good state of repair, you don't want to have to pay for a new roof for example in a couple of years time. Ideally you would then sell the house around the time property prices peak and buy another when they bottom out again.  Not easy to judge though! I'd review the Trust Fund against others if you decide to keep it there as 12% over 6 years isn't great, although the stock market has been depressed so it may compare favouribly. Keep some ""rainy day"" money spare if you can."
"The pension is indeed the clear winner and you haven't missed anything. It's easiest to just compare everything in current numbers as you've done and ignore investment opportunities. Given you expect to pay off your student loan in full, you should consider the repayment as a benefit for you too, so the balance is between £580 after tax and £1138 in your pension. As you say under the current tax regime you'd probably end up with £968 in your pocket from the pension. Some harder to value considerations: You might consider there's political risk associated with the pension, as laws may change over the years - but the government has so far not shown any inclination to penalise people who have already saved under one set of assumptions, so hopefully it's reasonably safe (I'm certainly taking that view with my own money!) Paying more towards your student loan or your mortgage is equivalent to investing at that interest rate (guaranteed). If you do the typical thing of investing your pension in the stock market, the investment returns are likely higher but more risky. In today's interest rate environment, you'd struggle to get a ""safe"" return that's anywhere near the mortgage rate. So if you're very risk averse, that would tilt the balance against the pension, but I doubt it would be enough to change the decision. Your pension might eventually hit the lifetime allowance of £1mn, after contributions and investment growth. If that's a possibility, you should think carefully about the plan for your contributions. If you do go over, the penalties are calibrated to cancel out the difference between higher-rate and basic-rate tax - i.e. cancelling out the tax benefits you outlined, but not the national insurance benefits. But if you do go over, the amount of money you'd have mean that you might also find yourself paying higher-rate tax on some of your pension income, at which point you could lose out. The lifetime allowance is really complicated, there's a Q+A about it here if you want to understand more." I'd put as much of it as possible into an ISA that pays a decent amount of interest so you get the benefit of the money accruing interest tax free. For the rest, I'd shop around for notice accounts, but would also keep an eye out for no-notice accounts. The latter might be beneficial if you expect interest rates to rise and are willing to shop around and move the money into accounts paying better interest every few months. Just make sure you're also factoring in the loss of interest when moving the money. You could look into fixed term savings bonds but I don't think they currently pay enough to make it worthwhile locking away your money. If you take out a personal loan, rather than a mortgage or car loan or hire-purchase agreement or other loan that's for making a specific purchase, then you can do whatever you want with the money. Send it abroad, burn it, spend it on expensive whisky -- it's up to you. The country you want to send the money to might have rules on transferring money into the country, but there will be no impediment at the UK end. First, I would point you to this question:  Oversimplify it for me: the correct order of investing With the $50k that you have inherited, you have enough money to pay off all your debt ($40k), purchase a functional used car ($5k), and get a great start on an emergency fund with the rest.  There are many who would tell you to wait as long as possible to pay off your student loans and invest the money instead. However, I would pay off the loans right away if I were you. Even if it is low interest right now, it is still a debt that needs to be paid back. Pay it off, and you won't have this debt hanging over your head anymore.  Your grandmother has given you an incredible gift. This money can make you completely debt free and put you on a path for success. However, if you aren't careful, you could end up back in debt quickly. Learn how to make a budget, and commit to never spending money that you don't have again. At 22yo, unless you have a terminal illness, you have many years to earn and save a lot more that you will have in your 401k right now (unless you have already been extremely lucky in the market with your 401k investments). This means that even if you lost everything in your 401k right now, it probably wouldn't hurt you that much over the long term. The net present value of all your future savings should far exceed the net present value of your 401k, if you plan to earn and save responsibly. So take as much risk as you want with it right now. There is no real benefit to playing safe with investments at your age. If you were asking me how much risk should you be taking with a $10m inheritance and no income or much prospects of an income, then I'd be giving you a very different answer. Since the question asked for options, rather than advice, I’ll offer a few.  And you can ignore the gratuitous advice that may sneak in. There are countries that will happily give you citizenship for a fee.  And others where an investment of far less than your million will get you well on your way.  Having citizenship and a passport from another country can be handy if your current one is or becomes unpopular or unstable. From data at numbeo.com, I estimate that my lifestyle would cost me $3300 (US) in Geneva, Switzerland, and that everywhere else on the planet would be less.  I haven’t been to Geneva, but I have spent only $2500 (average) per month in eleven countries over three years, and could have been comfortable on far less.  $2500/month will go through 1.2 million in only forty years, but if you use it to generate income, and are less wasteful than me, ... With the first few dollars you get, you might take steps to hedge the possibility of not actually getting it all.  Appeals can take a long time, and if the defendant runs out of money or figures out how to hide, the size of the judgment is irrelevant. Believe strongly enough in something to donate money for/to it? I’ll leave the investment options to others. Consider consulting a fee-only Certified Financial Planner. It will be worth the money to have your game-plan looked at by somebody who is trained and experienced in such matters, helping you avoid big mistakes and making the right decision for your personal situation. It should cost only a relatively small percentage of the overall inheritance. Firstly, there is also a lifetime gift+estate tax allowance. If the father's estate, including other gifts given in his lifetime, is unlikely to exceed that allowance, it might be simplest simply to give the whole amount now and count it against the allowance. Right now the allowance is $5.34M, but that seems quite a big political football and it's the allowance when you die that matters. Looking back at past values for the allowance, $1M seems like a pretty safe amount to bet on. If you want to avoid/minimize the use of that allowance, I would make a loan structured as a mortgage that will have $14K payments each year (which can then be forgiven). The points in Rick Goldstein's answer about an appropriate rate, and being able to give more if more notional donors and recipients can be used, also apply. So for example in the first year hand over $200K at 3.5% and immediately forgive $14K. The next year, forgive the interest charge of $6.5K and capital of $7.5K. Given the age of the daughter, I guess the father might well die before its all paid off that way, leaving some residue to be forgiven by the estate (and thus potentially incurring estate taxes). There might also be state gift/estate taxes to consider. Edited to reflect 2014 gift and lifetime exclusion limits. I won't make any assumptions about the source of the money.  Typically however, this can be an emotional time and the most important thing to do is not act rashly. If this is an amount of money you have never seen before, getting advice from a fee only financial adviser would be my second step.  The first step is to breathe and promise yourself you will NOT make any decisions about this money in the short term.  Better to have $100K in the bank earning nearly zero interest than to spend it in the wrong way. If you have to receive the money before you can meet with an adviser, then just open a new savings account at your bank (or credit union) and put the money in there.  It will be safe and sound. Visit http://www.napfa.org/ and interview at least three advisers. With their guidance, think about what your goals are.  Do you want to invest and grow the money?  Pay off debt?  Own a home or new large purchase?  These are personal decisions, but the adviser might help you think of goals you didn't imagine Create a plan and execute it. "Are there other options I haven't thought of? Mutual funds, stocks, bonds. To buy and sell these you don't need a lawyer, a real-estate broker and a banker. Much more flexible than owning real estate. Edit: Re Option 3: With no knowledge of investing the first thing you should do is read a few books. The second thing you should do is invest in mutual funds (and/or ETFs) that track an index, such as the FTSE graph that was posted. Index funds are the safest way to invest for those with no experience. With the substantial amount that you are considering investing it would also be wise to do it gradually. Look up ""dollar cost averaging.""" The UK doesn't tax gifts or wealth, so you don't have to pay any tax on your existing savings or the money your parents transfer you. If your parents lived in the UK then you might be potentially liable to inheritance tax on the money if they died less than seven years after giving it to you, but if they live in Japan this won't be relevant. In theory you might have to pay tax on any interest received in the bank account while you live in the UK. However this is likely to be very small, and if you don't have any other income then it's highly unlikely this would apply, as you can get up to £16,000 of interest without paying tax: https://www.gov.uk/apply-tax-free-interest-on-savings/how-much-tax-you-pay In addition to the other excellent answers here, check out Mr. Money Mustache's site, it's based in the US but the basics still hold here in the UK. Another great site is the Monevator which is UK based and gives some great information on passive investing. Well done on getting to this point at your age - you've got plenty of time for the miracle of compound interest to work for you. EDIT: Once you have any existing debts paid off, take a look at passive/index investing. This could be a good way to make your £150 work for you by capturing the gains of the stock market. Invest it long-term (buy and hold) to make the most of the compound interested effect and over time that money will become something substantial - especially if you can increase payments over time as your income increases. You could also look at reducing your outgoings as recommended on the Mustache site linked above so you can increase your monthly investment amount. As per JohnFx's comment above, consider whether it's worth more to you to just write this off. If not, if you feel that your son will be able to consider this without taking it personally, or you're willing to risk that relationship, then talk to him about it. Lay out the reasons why you need the money. If there are other children, it might be a simple matter of fairness to them. Based on your idea of deducting the money from his inheritance, I assume that the value you're docking from his inheritance will go somewhere else. Offer alternatives. You say that you can't take any money from him now, but letting him know that he can pay you in the future in lieu of loss of inheritance might be worthwhile. Be prepared with an idea of what to suggest if he says he can pay you some amount of money. Figure out what might be an acceptable payment plan and how to handle it if, at some point, he can't make payments for a time. This is a potentially ugly situation, and I can't guarantee that it will turn out better, but the more you prepare for the questions he's going to ask, the better off you're going to be. 1) You parents will have to pay tax on the gain as it wasn't their primary home.  You don’t pay Capital Gains Tax when you sell (or ‘dispose of’) your home if all of the following apply: As I look at it, it is your parents are the ones who own the property and they will have to pay on £60000. But as you say you pay part of the mortgage, I would go to a tax advisor/accountant to confirm if they will only pay on the £15000. I couldn't find any guidance on that matter on gov.uk 2) Inheritance tax will not be levied on it as it is below £325000, but tax will be levied on £325000, less £3000 annual gift allowance. Two articles for further information -  GOV.UK's Tax when you sell your home   Money.co.UK's Gifting money to your children: FAQs "Of course CDs are worth it compared to the stock market. In fact, most institutional investors are envious of the CDs you have access to as an individual investor that are unavailable to them. You just need to be competent enough to shop around for the best rates and understand your time horizon. There are several concepts to understand here: Banks give out CDs with competitive rates projecting future interest rates. So while the Federal funds rate is currently extremely low, banks know that in order to get any takers on their CDs they have to factor in the public expectation that rates will rise, so if you lock in a longer term CD you get a competitive rate. Institutional investors do not have access to FDIC insured CDs and the closest analog they participate in are the auctions and secondary markets of US Treasuries. These two types of assets have equivalent default (non-)risk if held to maturity: backed by the full faith and credit of the U.S. Here are the current rates (as of question's date) taken from Vanguard that I can get on CDs versus Treasuries (as an individual investor). Notice that CDs outperform Treasuries across any maturity timescale! For fixed-income and bond allocations, institutional investors are lining up for buying treasuries. And yet here you are saying ""CDs are not worth it."" Might want to rethink that. Now going into the stock market as an investor with expectations of those high returns you quote, means you're willing to stay there for the long-term (at least a decade) and stay the course during volatility to actually have any hope of coming up with the average rate of return. Even then, there's the potential downside of risk that you still lose principal after that duration. So given that assumption, it's only fair to compare against >= 10 year CDs which are currently rated at 2 percent APY. In addition, CDs can be laddered -- allowing you to lock-in newer (and potentially higher) rates as they become available. You essentially stagger your buyin into these investments, and either reinvest upon the stilted maturity dates or use as income. Also keep in mind that while personal emergencies requiring quick access to cash can happen at any time, the most common scenario is during the sudden change from a bull market into a recession -- the time when stocks plummet. If you need money right away, selling your stocks at these times would lock in severe losses, whereas with CDs you still won't lose principal with an early exit and the only penalty is usually a sacrifice of a few months of potential interest. It's easy to think of the high yields during a protracted bull market (such as now), but personal finance has a huge behavioral component to it that is largely ignored until it's too late. One risk that isn't taken care of by either CDs or Treasuries is inflation risk. All the rates here and in the original question are nominal rates, and the real return will depend on inflation (or deflation). There are other options here besides CDs, Treasuries, and the stock market to outpace inflation if you'd like to hedge that risk with inflation protection: Series I Savings Bonds and TIPS."