For many people in their 30s, debt may be a fact of life. According to the Office for National Statistics (ONS), more than one in four (28%) of people aged 25-34 said that keeping up with their debt repayments was ‘somewhat’ of a financial burden, while 9% said it was a ‘heavy’ burden. The number of people who thought debt was either ‘somewhat’ or a ‘heavy’ burden was only slightly smaller for those in the 35-44 age category (24% and 6%, respectively).

So, a lump sum inheritance could help you wipe the slate clean, by paying off any credit cards, store cards, overdrafts and personal loans (and even lingering student loans) that are draining your personal income. Paying these debts off should help you to save a significant amount of repaid interest over time, and remove that burden once and for all.

Once you’ve managed to clear outstanding debts, you should consider setting aside some cash as an emergency fund. It’s generally considered ideal to set aside at least three months’ worth of your overall household income. This should help cover any unexpected expenses or changes to your regular income, such as losing your job or emergency home or vehicle repairs.

If you don’t already own your own home, you could put your inheritance towards getting on the property ladder. According to the ONS, the average UK house price was £296,000 in August 2022, although these averages can vary quite dramatically in different parts of the country (£316,000 in England, £220,000 in Wales, £195,000 in Scotland and £169,000 in Northern Ireland).

It’s worth noting that in the UK, the average house deposit for a first-time buyer is around 15%. Usually, a higher deposit will get you a better rate on your mortgage, as well as leaving you with an lower mortgage to repay in the long term. Do remember that your home is at risk and may be repossessed if you don’t keep up with repayments on your mortgage.

You should also calculate whether you’ll be required to pay stamp duty on your home – see below for further details.

Alternatively, if you already have a mortgage, you may opt to repay some of it early or move to a bigger house or better location.

Paying off mortgage debt ahead of the mortgage term could potentially save huge amounts in interest. However, some mortgage products only allow you to pay off a certain percentage of the loan each year, without incurring early repayment charges. So, it’s important to check the terms of your mortgage deal, or you could end up out of pocket.

Similarly, if you choose to sell and move to another property, check where you stand with your mortgage provider as there may be an early repayment fee to pay. You also need to factor in Stamp Duty taxes, which vary across the UK and are subject to change. Exemption thresholds, for example, will significantly reduce from 31 March 2025. You can discover the current rates for England and Northern Ireland, Scotland, and Wales.

If you have children, you might decide that the best thing to do with your inheritance is to put it towards their education. If so, it’s worth knowing the costs involved.

For example, figures from the Independent Schools Council (ISC) show that the average public school charges around £3,000 to £5,500 per term, which works out at £9,000 to £16,500 a year. That’s not to mention the cost of uniforms, school trips and other all-important add-ons over the years.

Paying for a university place for your children doesn’t come cheap either. A three-year university course typically costs £9,250 per year in tuition fees alone, which works out at £27,750 over three years. Plus, accommodation and living expenses could run to £12,000 to £15,000 each year, depending on which university they attend.

Those costs all add up. But paying for your children to go to university would be a great way to help them get a valuable education without leaving them faced with a large debt that takes them several decades to repay.

If you’d prefer to see your money grow over time, you might decide to invest your inheritance. You can currently invest up to £20,000 into a Stocks & Shares ISA every tax year, and any capital gains you earn from your investment are free from tax. Please remember, though, that investment returns are not guaranteed, and you may not get back the full amount you invest.

You might consider topping up your pension too. For someone in their 30s, most financial planners will recommend that annual pension contributions should be at least 15% of your annual income (which includes any contribution from your employer). But if you haven’t been able to invest that much into your pension, now might be the right time to start.

You can make an annual pension contribution of up to £40,000 (or 100% of your salary, whichever is lower) which qualifies for tax-relief. Also, you can carry over any unused pension allowance from the past three years. In theory, you could invest a lump sum up to a maximum of £160,000 in the current tax year if you haven’t made any contributions in recent years. This could make a huge difference to your total retirement pot.

Whether it’s a life-changing sum of money or not, an inheritance will always come with mixed emotions. But receiving a lump sum in your thirties could help put you on a firm financial footing that will last for years to come. What you do really does depend on your priorities here and now, and your ambitions for the future.

All over the UK, our friendly financial planners are helping people at different life stages to focus on their financial wellbeing, and make the most of their money. We call it Life Landscaping®, because each individual journey is unique.

If you’ve received an inheritance lump sum and want to speak to one of our team, arrange an appointment or find out more, call 0800 915 0000, or alternatively use our contact form here.