The best ways to invest your lump sum wisely (2024)

Howeveryou comeintoalumpsum ofmoney,you’ll need to decide how best to use it.

Whether you want to use it to buy a house, put it towards your children’s education, or even simplysave itforthefuture, there area number of lump sum saving and investment options immediately available to you.

Thankfully, we’re on hand to breakthings down, so here is our guide on how to spend a lump sum wisely.

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What is a lump sum?

You can come across a financial windfall when one or more of your sources of income, or another source altogether, pays a large single sum of money to you.

This could come from winning the lottery, inheriting, a redundancy payment or drawing on your pension, for example.

Lump sums differ from other ways of saving.

While some savings willoffergradual returns, lump sums are larger amounts that can collectively earn a lot more interest.

This means that with the right saving strategy, not only will you be able to put your lump sum towards your priorities,butyou will alsobenefit from theadditional interest.

How to prioritise your lump sum?

Everyone’s financial situation is different, meaning thatdecidinghow to use your lump sum ultimately rests with you.

Thedecisionwill depend on the size of your windfall,personal circ*mstances, and how muchrisk you want to take on.

If you have around £10,000, are lookingto save towards your retirementand prefer to save your money with little risk attached, you may prefer to keep your money in a savings account.

If you have a larger amount and don’t mind taking on a little more risk, you mayachievebetter returns investing your money directly.


One of the biggest priorities many peoplehaveis paying off debts of various kinds.

Some debts, such as credit card debt, can quickly begin to multiply when not repaidon time, so oftentimes, thefirst priorityis to resolve any outstanding payments that you may have.

If you’re looking totake control of things like credit card debt, lump sums can go a long way towards improving your financial situationand relievinga lot of stress.

How to invest a lump sum

Investingalump sum isone of the more popular ways for people who are more comfortable with higher levels of risk to invest larger amounts of money.

Higher risk means your chances of greater profits are also higher, so risk isn’t always a bad thing.

It’s important to only invest amounts of money you are comfortable with, andinto investments that you are confident of.To understand moreabout investing money, you should speak to an adviser.

While the top savings accounts currently beat inflation, many people instead choose to invest in stocks, shares and potentially bonds as abetter way to generate higher returns.

Each different investment you make will have a different level of risk, and your returns will varyas a result.

Butas a general rule,wait at least five years before taking out your lump sum, as this allows savings to build,interest to accrue, and your investment time torecover any losses it may have incurred.

Regardless of what you choose to invest in, there are some effective ways to reduceyour risk.

As thereare different kinds of risk,it’s important to understand what potential downsides there are to each investment.

But if you come into a large financial windfall, you may want to split this sum into two halves, with one part invested into stocks and shares and the other into a safer savings account.

Learn more: what is CFD trading?

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Build emergency savings

Howeveryou choose to invest your lump sum, it may also be a good idea to build an emergency savings pot.

Typically, an emergency savings pot should cover about three months' salary and be quickly accessible so that you can use it whenever you need it.

These kinds of savings will cover you in case of unforeseen circ*mstances, such as redundancy or illness.

Always check with your employerabout itsworkplace illness policyand the eligibilitycriteria, buthaving emergency savings to support you in times of need will give you a little more peace of mind.

Saving with a savings account

If your lump sum is a smaller amount or you would prefer to save your money towards certain priorities,a simple savings account might be the better option for you.

Cash savingsare always popular with people who want to put away a lump sum and earn interest over a long period of time.

This can be a very good way to save for things without taking on bigger levels ofrisk. Savings accounts are much safer, buthow much interest you earn will come down toyourbank’s interest rate.

Saving with an ISA

Individual savings accounts(ISAs)are a particularly good way to savetowards ahouse purchase or retirement, or– with someparticularISAs– yourchildren’s future.

There area number ofdifferent ISAsavailablefor different savings purposes,and eachcaninvolvedifferent kinds offinancialproducts and savings amounts.

You could put your lump sum into an individual cash ISA, where you canearn tax-free interest onup to£20,000.

If you’re looking to save towards your first house, you could also considera lifetime ISA.

These ISAs allow you to put up to £4,000a yearinto a savings account, with a limit of £20,000.

LifetimeISAs were introduced with the explicit intention of helping18-40-year-oldssave towards their first homes.

So,if buying a house is your goal,this typeof ISAisa good option. There are alsojunior ISAsthat can helpwithsavingmoneytowards your children’s future.

TheseISAs let you save up to£9,000 a yearand canbe only withdrawn oncethe children are over 18.

If you're looking at making potentially larger gains (but at an increased risk), you could also consider .

Whether you’re looking to invest or save your lump sum,having a financial windfall at your disposal can helppay back debts,buy yourfirst house or save for your children’s future.

Investing, saving andbuilding for your future is important, so it’s vital thatas you’re makingdecisions about your financial future, you have the right advice.

Foryourexpert financial adviser,trustUnbiased.

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We’ll find a professional perfectly matched to your needs. Getting started is easy, fast and free.

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The best ways to invest your lump sum wisely (2024)


What is the best way to invest lump sum? ›

Cash savings are always popular with people who want to put away a lump sum and earn interest over a long period of time. This can be a very good way to save for things without taking on bigger levels of risk. Savings accounts are much safer, but how much interest you earn will come down to your bank's interest rate.

What is the best way to use a lump sum of money? ›

What to do with a large sum of money
  1. Step 1: Don't feel like you have to rush. ...
  2. Step 2: It's OK to spend a little. ...
  3. Step 3: Pay off high-interest debt. ...
  4. Step 4: Build up your emergency fund. ...
  5. Step 5: Save for short-term goals. ...
  6. Step 6: Invest it.
Jan 19, 2024

What is the smartest thing to do with a lump sum of money? ›

1 – Free your income. 2 – Create cash flow. 3 – Put a down payment on a property. 4 – Save for long-term growth.

Where is the best place to put a lump sum of money? ›

Put it in a bank account - If you think you'll be spending money, then you could just keep it in your regular bank account. Invest it - By investing your money you could allow it to potentially grow. Most investments, such as shares and funds, offer potential returns on your money over a longer term.

What is the safest place to invest large sum of money? ›

Safe assets are those that allow investors to preserve capital without a high risk of potential losses. Such assets include treasuries, CDs, money market funds, and annuities. There is, of course, a risk-return tradeoff, such that safer assets typically offer comparatively lower expected returns.

What is the safest investment for a large sum of money? ›

Overview: Best low-risk investments in 2024
  • Short-term certificates of deposit. ...
  • Series I savings bonds. ...
  • Treasury bills, notes, bonds and TIPS. ...
  • Corporate bonds. ...
  • Dividend-paying stocks. ...
  • Preferred stocks. ...
  • Money market accounts. ...
  • Fixed annuities.
Apr 1, 2024

What is the lump sum method? ›

A lump-sum payment is a monetary sum paid in one single payment instead of allocated into installments.

Is it better to invest lump sum or monthly? ›

When you put all your money in at once, you're more likely to see results quickly. This can be a helpful motivator for a beginning investor. You will often see higher returns with lump sum investing compared to dollar-cost averaging.

Do millionaires keep their money in cash? ›

Many millionaires keep a lot of their money in cash or highly liquid cash equivalents. They establish an emergency account before ever starting to invest. Millionaires bank differently than the rest of us. Any bank accounts they have are handled by a private banker who probably also manages their wealth.

What are the disadvantages of lump sum investment? ›

What are the disadvantages of lumpsum investment in mutual funds? Lumpsum investments in mutual funds lack the benefit of cost averaging and can be subject to market timing risks. Additionally, a large initial investment may lead to higher exposure to market fluctuations compared to periodic investments.

How do I let my money grow? ›

Position yourself for success
  1. Set up your emergency fund.
  2. Manage your debt.
  3. Understand your budget.
  4. Open a high-yield savings account.
  5. Open a money market account.
  6. Put your money into a certificate of deposit (CD)
  7. Invest for retirement.
  8. Put your money to work in a brokerage account.
Aug 25, 2023

Where can I get 7% interest? ›

7% Interest Savings Accounts: What You Need To Know. Why Trust Us? As of April 2024, no banks are offering 7% interest rates on savings accounts. Two credit unions have high-interest checking accounts: Landmark Credit Union Premium Checking with 7.50% APY and OnPath Credit Union High Yield Checking with 7.00% APY.

What is the best bank account for over 60s? ›

We've summarised these different savings accounts available to you in the table below:
Who Offers It? (Bank or Building Society)Type or Name of Savings AccountInterest Rate
First DirectRegular saver7.00%
Ford MoneyFlexible saver4.60%
Goldman SachsOnline savings account4.75%
Goldman SachsCash ISA4.75%
15 more rows

What is the best investment right now? ›

11 best investments right now
  • High-yield savings accounts.
  • Certificates of deposit (CDs)
  • Bonds.
  • Money market funds.
  • Mutual funds.
  • Index Funds.
  • Exchange-traded funds.
  • Stocks.
Mar 19, 2024

What to do with 50k lump sum? ›

How to invest $50,000
  1. Look into investment accounts. ...
  2. Explore low-cost investments. ...
  3. Consider diversifying your assets. ...
  4. Max out your retirement accounts. ...
  5. Optimize for tax implications. ...
  6. Invest for more than retirement. ...
  7. Chat with an advisor.
Apr 2, 2024

What to do with 500k lump sum? ›

1. Stocks & ETFs. One of the most common ways to start investing is to build a portfolio of various stocks and exchange-traded funds (ETFs). And with $500,000, you can certainly put a lot of your money to work in the market and build a very well-rounded portfolio.

Is it better to invest one lump sum or monthly? ›

Investing a lump sum means that you don't have to try to figure out the best time to make periodic investments. You can set up your portfolio and let it grow. A 2021 Northwestern Mutual Life study showed that investing a lump sum generally outperforms dollar-cost averaging over various periods of time.

Where to put $500,000? ›

Bottom Line. With $500,000 on hand, several investment options open up to you. Just a few of the strongest include a safe, but typically profitable, index fund, investing in or being an entrepreneur, buying real estate or seeking out hedge funds and private equity.

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