How to spend a windfall lottery win or cash inheritance, travel and property most popular

IT’S a problem we’d love to have: what to do if you won or inherited $100,000. Most Aussies would use it to take a holiday — but there are much wiser ideas.

IT’S a problem that most of us would love to have but people faced with a sudden win or inheritance often don’t know what to do with it.

Of course it all depends on the size of the windfall but, with more and more Baby Boomers in line to receive inheritances it is a question worth asking.

Most Australians say if they won or inherited $100,000 they would rather take a holiday than save it for their retirement, a survey by BT Financial Group has found.

Nearly half of us would invest the money in a term deposit but 34 per cent would buy property or go on a holiday but only one in five said they would put it into their superannuation, the poll found.

Investing a windfall in super pre-retirement could make a big difference to your standard of living later in life, says BT’s Melinda Howes.

And even those close to retirement age are not that keen on giving their super a boost, despite the generous tax implications available.

“It’s understandable that people are interested in travel and holidays and as a nation we’re pretty property obsessed,” says Melinda Howes, BT’s general manager of super. “But when you think about an inheritance for those aged between 55 to 64 we would have thought super was more of an option.”

Investing an inheritance in super in your 50s or 60s could be what makes the difference between a frugal and a comfortable standard of living in retirement, she added.

Younger people say buying a property would be their preferred form of investment while share ownership was not considered a priority.

This couple took an early retirement after becoming the joint biggest winners in UK National Lottery history.

Unfortunately, many people who suddenly come into money end up blowing it, says Deborah Kent, national president of the Association of Financial Advisers.

“Quite frankly, a lot of people don’t know what to do (when they come into a windfall) and they spend it,” Kent says.

“There is a lot of pressure from families but if they buy a BMW for all the kids they might end up with nothing.”

She says a good financial adviser can weigh up your situations, take into account that you might want to go on holiday or have some fun with the money.

But they will also look at your longer term goals and examine your debt levels to ensure you make the most of that windfall.

“Because it’s likely you’ll never get that money again,” she says.

Where would you put a fistful of dollars?

What to do if you come into a windfall

1. Take a deep breath — Don’t rush to spend it. If an investment sounds too good to be true it probably is.

2. Pay down debt first — How much do you owe on your home loan? How many more years of school or uni fees do you have?

3. Investment implications — if you choose to invest in property, what are the costs? What are the tax implications? Does the investment help your tax situation?

4. Getting help — talk to a financial adviser who can help guide you through the information and help you weigh up the facts rather than making an emotional decision.

5. Don’t be pressured — family members may want a cut but don’t go out and spend all the money on the kids before you have ensured yourself a lasting income.