What to do with money

If you’re lucky enough to have some unexpected money, for example from an inheritance or a redundancy, you may be wondering what to do with your money.

Whether you want to save for your future, try your luck on the stock market or splash out on a holiday, we have ideas and tips about what to do with your money to suit a range of budgets.

The information provided here is for informational and educational purposes only and does not constitute financial advice. Please consult with a licensed financial adviser or professional before making any financial decisions. Your financial situation is unique, and the information provided may not be suitable for your specific circumstances. We are not liable for any financial decisions or actions you take based on this information.

With so many options to choose from, deciding what to do with your money can be daunting. But this doesn’t have to be the case. If you focus on the basics, there are five main things you can do with your spare cash:

1. Spend it
2. Save it
3. Invest it
4. Give it away
5. Pay taxes or debts

Let’s look at each of these options in a bit more detail.

If you’ve come into some extra cash, you could of cours use it to treat yourself. Investing in things that bring you joy can be really rewarding. Whether it’s a new gadget, a stylish piece of clothing, or something you’ve had your eye on for a while, just make sure it’s something you truly love and can afford. Doing a bit of research to find the best price can help you get the most value for your money.

Alternatively, spending on experiences can be even more fulfilling. Imagine a memorable trip, a new hobby, or a special activity that you’ve always wanted to try. These kinds of experiences often create cherished memories that you’ll look back on fondly for years to come.

Putting extra money into savings can give you a vital financial safety net for emergencies and help you work towards your savings goals. Exploring different options beyond the high-street banks can help you find the best interest rates. There are plenty of savings accounts out there, so take the time to research and choose the one that fits your needs best.

Investing your spare cash can be a smart way to grow your wealth over time, as long as you’re comfortable with the risks involved. In Ireland, you have a variety of investment options to consider. You could buy shares in companies, invest in bonds, purchase property, or even explore alternative investment forms like commodities. However, the value of your investments can fluctuate, and there are no guarantees you’ll make a profit.

Donating to charities or causes you care about can be one of the best things to do with money. Whether it’s a small or large amount, giving to those in need or supporting causes you’re passionate about brings its own rewards. Plus, in Ireland, charitable giving can also offer some financial benefits. Through the Charitable Donation Scheme, you can get tax relief on your donations. This potentially lowers your overall tax bill. So it’s a win-win: you help others and get a tax break in the process.

If you’re dealing with debt, it can feel like a weight dragging you down, especially when you’re trying to save for something meaningful. It’s easy to feel frustrated if you get some extra cash and end up having to use it to pay off debt instead of saving for your dreams. While it might seem like you’re not getting anything tangible in return, tackling high-interest debt like credit cards or other loans can give you a clean slate from which to start using your money how you really like, and the peace of mind from knowing you’re completely debt-free may feel totally worth it.

Using your spare money wisely can have a big impact on your financial wellbeing. So what’s the best course of action? The answer depends on your individual financial circumstances.

Below are some of the most popular and effective ways to manage your extra cash, although you may want to speak to an expert for more tailored advice.

Having a spare pot of cash in case of financial emergencies is vital. If your car breaks down or the boiler stops working, for example, you will need access to additional money at short notice. Another way to look at an emergency fund is as a safety net in case things go wrong, often referred to as a ‘rainy day’ fund. Starting an emergency fund means you might not have to dip into your overdraft or spend on your credit card to cover unexpected large expenses.

As a rule of thumb, aim to keep at least three months’ worth of outgoings in an easy access savings account. The exact amount will depend on a few variables, including: your total household expenses; the number of people in your household and their contributions, and the income security of your household.

You can read information about how to build an emergency savings pot on our website.

Deciding whether to pay off debt or build a savings pot can be difficult. However, in most cases it makes sense to prioritise clearing any high-interest debts, like loans and credit cards, before you start to save.

That’s because you’ll typically pay more interest on your debt than you would earn from any investments or interest on your savings. With some credit cards charging as much as 18.9% APR, using spare cash to clear your existing debt could save you a significant amount of money in the long run.

Clearing your debts can also help to alleviate stress and may even improve your credit score. Visit our article, ‘How to pay off credit card debt’, for more useful tips and advice.

Overpaying your mortgage is another way to use your spare money effectively. This might take the form of a one-off lump sum or regular overpayments. Either way, overpaying will reduce your mortgage balance faster, potentially saving you hundreds or even thousands of pounds in interest payments. (see below)

Before you proceed it’s important to check whether you’ll be charged a penalty for making overpayments. Some mortgage providers allow you to pay off a certain amount of the loan without incurring a penalty.

Increasing payments into a pension scheme can be a tax-efficient way to use your spare money. This is because the government effectively tops up pension contributions, so the more you invest, the greater the financial gain.

The amount of tax relief you receive will depend on whether you are a basic rate, higher rate, or additional rate taxpayer. The maximum amount you can pay into your pension pot and receive tax relief for is currently £40,000 (the annual allowance), while the lifetime allowance is set at £1,073,100. Find out more about saving into a pension scheme here.

If you’re not sure what to do with your money, take some time to think about what’s important to you. Do you have any specific savings goals in mind? Whether it’s saving for a wedding, a baby or a trip abroad, it’s a good idea to outline some clear objectives. Once you’ve decided what your goals are, open up a savings account and squirrel away your spare cash to help you achieve them.

There are various types of savings accounts available and the most suitable option will depend on your particular circumstances. For example, if you’re saving for something specific, such as a new car, an easy access savings account may be ideal. However, a fixed rate bond may be more appropriate for long term savings.

ISAs remain a staple of many people’s savings portfolio. As they’re tax-free, ISAs may be a good option if you have a significant amount of savings or you are an additional rate taxpayer. Anyone can currently save up to £20,000 in an ISA every tax year and the funds won’t be liable to income tax or capital gains tax.

If you don’t need access to your spare cash in the short term, then you might want to think about investing it. Investing can take various forms, including buying stocks and shares. Investing in the stock market can be a good way to maximise your returns, although it comes with significant risk.

Stocks and shares aren’t the only investment opportunities. You could also use your extra savings to invest in tangible assets such as antiques, fine art, wine, and precious metals. If you have a sizable amount of spare cash, property investment may be another option. There are several different ways to invest in property in the UK.

If you’re still thinking “what should I do with my money?”, then it’s a good idea to speak to an independent financial adviser (IFA).

An IFA can help you with a variety of personal finance matters, including retirement planning and wealth management. After looking in detail at your finances, they will recommend a range of options tailored to your specific needs and goals. You’ll need to pay for your tailored financial advice, but if it increases your prosperity in the long term then consider it money well spent.