What to do if you win the Premium Bond jackpot - or receive a large inheritance

Congratulations! You’ve received a big cash windfall. But what should you do with it? Save it, spend it, invest it, pay off the mortgage… It can feel overwhelming deciding what to do - we ask experts for their tips.

A close-up shot of friends clinking sparkling wine glasses at sunset on a yacht
(Image credit: Yana Iskayeva)

Whether it’s winning the £1 million Premium Bond jackpot (or even the second-biggest prize of £100,000), or receiving an inheritance, a large cash windfall is often life-changing.

Aside from the rush of excitement when you realise how many zeros are now on the end of your bank balance, a windfall offers up opportunities - as well as challenges.

It may give you the chance to reach one of your financial goals, or support your plans for building long-term wealth. You may already have earmarked some of the money for a luxury holiday and/or as a gift to a loved one.

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But it can also feel very overwhelming. Surprise at getting the money, or the pressure to do something special with it, can be stressful.

One of the worst things you can do is leave the whole lot in cash. Almost two thirds (62%) of those who had an inheritance in the past five years have kept some or all of the money in physical cash or in a bank or building society account, according to a survey of 500 adults by the wealth app Chip.

“There’s a real risk that people fall foul of inertia – missing out on opportunities to really use the money to its full potential, or risking it losing ‘real-term’ value due to inflation – while they work out their next steps,” comments Gina Silvester from Chip.

A £25,000 inheritance put into a current account earning no interest five years ago would be worth only £18,750 in real terms today due to high inflation.

A Premium Bond jackpot winner who did the same would find their £1 million prize had shrunk to about £750,000 in real terms.

What to do with a surprise windfall

According to Chip’s survey, the average cash inheritance is £24,583. One in six people inherited £50,000 or more. 

Hundreds of people scoop a prize worth £50,000 or more on the Premium Bonds every month (currently, two customers get a visit from Agent Million each month telling them they’ve won £1 million, 91 people win £100,000 and 182 win a £50,000 prize).

Lottery winnings can also be life-changing: last week, a lucky ticket holder for the EuroMillions £75 million jackpot won with their lottery number.

Ian Pickford, partner and head of financial planning at financial services firm Mazars, notes: “As the dust starts to settle and the champagne is put down, it’s imperative people seek the advice of experts and put a long-lasting plan in place. If [a large payout is] managed correctly it can offer generations a lifetime of financial security, but it can also cause family rifts and money troubles down the line.”

Don’t panic, and take your time

The first tip is not to panic or get stressed about your windfall. “You don’t need to act quickly because that money isn’t going anywhere unless you want it to. Take your time to make decisions and think through what you want to achieve with that money both now and in the future,” says Pickford.

Iain McLeod, head of private client consultancy (south) at St. James’s Place, agrees. “It will be tempting to spend large sums initially (perhaps on luxury items or property), or to make generous gifts to loved ones or charities. It may be better to ‘pause’ any major decisions for at least six months or more. This will help you to acclimatise to the new found wealth, and consider what is important to you in the long term.”

You could park the money in a high-interest savings account, but beware of leaving it there for too long (because of the inflation erosion risk mentioned earlier), and also be on your guard for scams.

Beware of fraud

McLeod says it may sound odd, but a sudden windfall of money can put a person in a very vulnerable position. He tells MoneyWeek: “It’s extremely important to beware of sophisticated fraud and scams that can potentially target people who have received a large windfall.

“Inexperience can sometimes lead to decisions you might later regret. Equally, knowing who to trust for advice is difficult. For example, having trusted third parties present at meetings where finances are being discussed can be a good thing to do, but it’s important to consider any conflicts of interest that they have.”

Make a plan 

Depending on the size of your inheritance or winnings, you could spend a “little” on something as a treat. For example, buying a car or staying in a fancy hotel. 

Then it’s time to put a financial plan in place. According to Silvester, it’s important to consider whether you can pay off any particularly expensive debts, and make sure you have an emergency fund to help cover unexpected costs – six months’ living costs in an easy-access savings account is a good rule of thumb.

Next, consider your end goals. Is it paying off your mortgage? Maybe you’re self-employed and don’t have a pension, so prioritising retirement savings is important. Perhaps you want to send your children to private school, or help a relative with their living costs. Quitting your job and retraining as something else could also be on your bucket list. 

“When thinking about your financial plan, consider what fits both your goals, but also your family’s. And add a buffer so you have the flexibility to meet changing circumstances as life throws its various curveballs at you,” says Pickford.

Make your money work as hard as possible

If you’re keeping money in cash, make sure you’re getting the most competitive interest rate you can. Check out our round-up of the best savings rates.

Silvester comments: “If you don’t need the money immediately, or are willing to put it to work towards long-term goals, investing may be the right option for you. Where and how much you invest will be a very personal choice. You’ll need to consider factors like your appetite for risk and what you’re comfortable investing in and your individual circumstances.”

Consider taking financial advice

A financial adviser who has experience in working with people who have received large windfalls can help you define your financial priorities.

They can work out how much income your wealth could generate, which in turn can help you decide how much to gift to loved ones or charities. 

“Getting good advice from an experienced financial advisor can help to avoid mis-steps and to make better, long-term decisions,” says McLeod.

“If you would like to make gifts to charity, an adviser can help you do so in the most tax-efficient way possible. They can also help to spot tax planning opportunities – for example making gifts by contributing to loved ones’ pensions, or overpaying on their mortgages, or even varying an inheritance to accelerate your inheritance tax planning.”

Ask friends for recommendations of a good financial adviser, and make sure you fully understand what the fees are. You can also look up an adviser on Unbiased and VouchedFor.

Protect your position

According to Pickford, one of the first things he suggest to clients who have come into a significant amount of money is to update their will. 

He says: “It’s just a first step before more complex legal advice is needed but it immediately protects your good fortune.”

Ruth Emery

Ruth is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times. 

A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service. 

Outside of work, she is a mum to two young children, a magistrate and an NHS volunteer.