My 76-year-old mother is selling her £300,000 property – what should I do with the money?

My 76 year old mother moved in with me (her daughter) and my partner after my father took his own life almost two years ago.

Mom has just commissioned our local estate agent to put her property up for sale, and the sale will take place shortly.

Hopefully he will make more than £300,000 from the sale and I am trying to see what the best thing to do with that money is.

I have considered Premium Bonds, ISA, Fixed Savings Account and possibly buying a small rental property. Which is the best option? LG, via email

SCROLL DOWN TO LEARN HOW TO ASK HIS FINANCIAL PLANNING QUESTION

This is Money’s Harvey Dorset responds: I’m sorry to hear about your father. I’m glad to hear that you and your mother are eager to ensure that she has what she needs for the future, despite the sad circumstances.

Before deciding where to invest money from the sale of a property, you need to establish what kind of return your mother hopes to earn and what kind of access she needs.

Buying a small property, for example, could provide good returns through rentals.

However, if this purchase takes up the bulk of the £300,000, then you will not be able to access funds in an emergency without selling the property, and becoming a homeowner comes with a lot of headaches.

It is therefore advisable to ensure that you put your money into a variety of investments, combining both illiquid and liquid products.

Diversification will also help ensure that you do not lose a large portion of your funds if one of your investments fails.

This is also where it’s important to consider what kind of risk your mother is willing to take with her money.

In general, the amount of risk you should take will depend on how much money you can afford to lose, as well as the time period you are investing over.

If you expect to need access to your money soon, then the investments you make should be considerably lower in risk than if you plan to leave them untouched for several years.

However, you should be aware that products such as Premium Bonds and Cash ISAs are unlikely to generate the kind of returns that investing can offer.

This is Money spoke to two financial advisers to find out what your mother should consider before committing her money to any particular investment or product.

Reserve: Nicholas Nesbitt warns that it is advisable to keep some cash for emergencies

Nicholas Nesbitt, financial planning partner at Forvis Mazars, answers: I would recommend that you and your mother take time to identify what your needs are with respect to this money.

This will help you know what is the right course of action to take with the house winnings.

The first question is whether your mother needs a regular income from these funds to maintain her lifestyle.

She is on the state pension and presumably her expenses have been reduced since she moved in with you, but would an additional source of income be desirable?

You may then want to consider whether you expect to rely additionally on funds in the near future.

For example, do you have plans to travel, give money to your family, or is there a chance you might need care?

By considering these points, you can build a profile of how the funds can be used and then choose a selection of savings and investments that appropriately reflect those needs.

An initial element that should be present in everyone’s financial plan is to maintain an adequate cash reserve to deal with any unforeseen or emergency needs.

When deciding what to do with the remaining funds, in addition to the need for income or lump sums, the following points must also be taken into account:

• Willingness to take investment risks: Are you willing to risk potential losses in an attempt to grow your funds in the medium and long term?
• Loss Capacity: Given its potential funding needs, can the fund afford to experience the potential losses and volatility associated with investing?
• Simplicity/complications: Some investment options are very simple and uncomplicated, while others may require a lot of monitoring and involvement. However, while I generally agree with keeping things simple whenever possible, don’t ignore the concept of investing simply because of the complexities associated with it. Today, there are several services that make investing accessible and more understandable.
• Are there any personal preferences to take into account? Some people understand and value the perceived stability and predictability that real estate investments bring, others may want their money invested sustainably, etc.

As a final step, you should consider your mother’s tax position and then design a mix of savings and investment options that will meet your mother’s needs and preferences in a tax-efficient manner.

To give a simple example, many people have not used their ISA allowances over the years and now, with recent changes to tax rules and the interest rate environment, they find themselves suffering tax on their bank interest.

There is a lot to take into account in the above and I would always recommend seeking impartial and independent financial advice to help address these questions.

A good counselor will take the time to understand your goals, consider all the options, and then come up with a plan to meet your mother’s needs.

Jonathan Halberda, a specialist financial advisor at Wesleyan Financial Services, responds: Given your mother’s age and circumstances, it is important to consider options that balance safety, accessibility and income generation.

There are several avenues that can be explored to grow the £300,000 generated from the sale, but there is no one-size-fits-all answer.

The right choice will depend on personal goals, risk tolerance and future needs.

A balanced strategy might involve diversifying across a range of different options, such as keeping some cash for emergencies, investing conservatively in a stocks and shares ISA for growth and perhaps using fixed savings for guaranteed returns.

This reduces the risk of becoming overly reliant on any one type of investment. It is also advisable to think about potential long-term care needs.

Maintaining some liquidity is crucial, whether through accessible savings accounts, Isas or other low-risk investments, to cover future care costs without needing to sell assets at a disadvantageous time.

Growth: Jonathan Halberda says a stocks and shares ISA could generate higher returns than cash products

Premium Bonds are a safe, government-backed option that provides the opportunity to earn tax-free rewards instead of earning regular interest.

They offer easy access to funds and preserve capital.

However, they do not offer guaranteed income or significant returns, making them less ideal for those who need a stable income.

ISAs are tax-advantaged investment vehicles. Cash ISAs offer security and tax-free interest, but returns may not keep pace with inflation, which could erode purchasing power over time.

Stocks and Shares ISAs offer the potential for higher returns by investing in a variety of assets such as shares and bonds.

These involve higher risk, but can be managed conservatively by focusing on lower-risk assets.

A cautious investment strategy can provide better growth and income potential than cash ISAs.

Fixed savings accounts provide a guaranteed interest rate for a set term (for example, one, three or five years).

They offer higher returns than instant access accounts, but have less flexibility since the money is locked in for the entire term.

This could be a good option for a portion of your funds if you don’t need immediate access.

Purchasing a rental property could generate a regular income and provide potential capital growth.

However, it does come with risks and responsibilities, such as property maintenance, tenant management, and possible periods without rental income.

Additionally, property is an illiquid asset and may not be ideal if your mother needs quick access to your funds.

Your mom might also consider investment bonds, which offer medium- to long-term growth potential and may be suitable for those seeking both access to capital and growth potential.

Annuities provide a guaranteed income for life, which can be attractive for someone worried about their savings running out. However, they may lack protection against inflation.

Ultimately, consulting with a financial advisor can help create a personalized strategy that aligns with your mother’s financial needs, risk tolerance, and future goals, ensuring a secure and comfortable future.

By carefully considering all available options, you can help ensure that your capital is preserved, meets your income needs, and is flexible enough to cover any future requirements.

They can also help you review the inheritance tax (IHT) implications and create a plan around them.