Receiving an inheritance is an emotional experience. It should be a blessing, but for many, it is an added stress during an already emotional time. 

This can make the decision-making process extremely overwhelming. How you spend and invest funds will depend on how much money you have received through your inheritance, as well as your current financial well-being. 

Here are seven strategies to consider.

Invest in a Term Investment

Do you need time to make a decision about your inheritance? Investing your funds in a Term Investment is a smart way to continue growing your funds while you seek support and guidance about your next move. With an APS Term Investment, you could set your funds aside for 12 months and earn 5.50% interest over this period. If you have received a large inheritance, this could be a significant boost that you wouldn’t otherwise have in an everyday bank account.

Pay off outstanding debts

If you have a mortgage, you might consider using your inheritance to pay off some of your home loan. Reducing your home loan balance can save interest and help you to build equity. 

If you have any other debts with a higher interest rate, such as personal credit cards or loans, it could be wise to pay these debts off first. Paying off debts isn’t the most exciting way to spend your inheritance, but easing yourself of this burden is a rewarding experience.

Contribute to your superannuation 

No matter what stage of life you’re in, we encourage you to consider your retirement savings and whether your inheritance could support you in preparing for your future. This is especially important if your projected income for retirement is falling short.

If you are interested in making a personal contribution and enjoying the tax benefits of this strategy, be sure that you won’t need these funds prior to retirement! Speaking with a Financial Planner about your superannuation strategy is a great first step.

Set your family up for success

For many parents and grandparents, there is no greater gift than setting their family up for financial freedom. If you are in a comfortable financial position or have some spare funds left in your inheritance, you may consider gifting funds to your kids or grandkids.

One way that you could support them is by helping them save for a home deposit. If you have a young family, you may wish to open a Term Investment for them to use when they are ready to purchase property one day. Your funds will grow over time with a high-interest rate, allowing them to enter the property market sooner rather than later.

Treat yourself

There’s nothing wrong with allocating a proportion of the inheritance to play money, as long as you are not sacrificing your long-term financial health. You may wish to take a holiday that you have always dreamed about or buy a new car that you wouldn’t have purchased otherwise. 

We recommend addressing your debts, superannuation and savings first and then using any leftover funds to treat yourself in whatever way you wish.

Donate to a worthy cause

If you are in a comfortable financial position, you could consider ways to support those who could significantly benefit from a donation.

This may involve a one-off donation to a charity that is close to your heart, or you could consider leaving a gift in your will to a foundation that will benefit. 

The APS Benevolent Fund was created with this in mind. All donations support the Cerebral Palsy Education Centre (CPEC) to create healthier and happier lives for those children living with Cerebral Palsy. Members and supporters can donate at any time or set up a gift in their will, knowing with confidence that their contribution will be supporting families for many years to come.

Seek expert advice 

Determining the best way to manage your inheritance will depend on your unique circumstances and for this reason, we always recommend taking your time and seeking financial advice when you are ready. 

Speaking with a financial adviser about your goals and plans will help inform the best strategy for you and your family. 

Get in touch with the team at APS Financial Planning.

Written by APS Senior Financial Advisor, Paul Hatzigeorgiadis.

Paul has over 25 years of experience in the financial services sector. Over Paul’s history, he has provided advice to an extensive range of clients from wealth accumulators to pre and post retirees advising them on Wealth Creation, Cash Flow Management, maximising Centrelink benefits in Retirement, Personal Insurances, Debt minimisation strategies and Superannuation. Paul is married with an 11-year-old daughter and enjoys spending time with family and friends.  Whether it’s assisting clients to meet their short-term goals or working with them over a longer term, Paul enjoys helping guide his clients with their financial future.