Navigating the Waters of Inheritance: Should You Invest or Save? 

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
 
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