Should You Invest or Save? Private banking experts give their expert advice on handing your inheritance

Receiving an inheritance can be a bittersweet experience – a tangible connection to a loved one passed, and a responsibility to manage it wisely. The question that plagues many in such circumstances is whether to invest the inheritance, save it, or perhaps a combination of both. Finance experts at Arbuthnot Latham offer their guide to navigating how to handle your inheritance.

Saving Your Inheritance: The Sheltered Harbour

Pros:
Safety First: Savings, especially when placed in banks or building societies are covered by the Financial Services Compensation Scheme (FSCS), provide a safety net. You can be assured that your capital, up to £85,000, is protected.
Liquidity: Savings accounts offer easy access to funds, ensuring that you have the flexibility to handle any unexpected expenses or immediate financial needs.
Steady Growth: With savings, you are likely to earn interest, albeit modest, providing a guaranteed, if minimal, growth to your capital.

Cons:
Inflation’s Erosion: The silent enemy of savings is inflation. Over time, if the interest rate on your savings account does not outpace inflation, the real value of your money may decline.
Missed Opportunities: By keeping the entirety of your inheritance in a savings account, you may miss out on potentially higher returns that investment opportunities might offer.
Investing Your Inheritance: Venturing into the Open Sea

Pros:
Potential for Higher Returns: Historically, investments have the potential to provide higher returns than traditional savings accounts.
Diversification: Investment portfolios can be tailored to fit individual risk appetites. Diversifying across different asset classes can help spread risk.
Benefit from Compounding: By reinvesting dividends or interest, you can leverage the power of compounding, where your returns generate their own returns, potentially leading to exponential growth over time.
Cons:

Market Volatility: Investments are subject to market fluctuations. This means the value of your inheritance could rise, but it could also fall.
Liquidity Concerns: Some investments, like real estate or certain funds, might not be as liquid as savings, making it challenging to access funds in a hurry.
Complexity: The world of investment is vast and varied. Without proper guidance, navigating this landscape can be daunting and potentially risky.

Striking a Balance
Experts at Arbuthnot Latham say; “For many, the ideal approach lies in finding a balance between saving and investing. An emergency fund or a portion of your inheritance set aside for short-term goals could reside in savings, while the remainder could be invested for longer-term growth. The exact split would depend on individual financial circumstances, risk appetite, and life goals.”

Conclusion

Inheritance, besides its monetary value, carries the weight of legacy. It is a continuation of a loved one’s story and, as such, deserves careful consideration. Whether you lean towards saving, investing, or a mix of the two, seeking expert guidance can ensure that you honour the legacy, making the most of what you have inherited.