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Zoe, 41

Zoe has big dreams. One day, she hopes to open a dog-friendly B&B on the coast of Devon. And she may well do it, because Zoe is a dedicated saver – even if the jargon sometimes gets in the way.

My relationship with money: "Safe"

"I try to think about what I spend, whether or not it’s on something I need. I work very hard for my money and I wouldn’t want to risk gambling it away on the stock market. I don’t really understand it enough."

"My husband tends to leave the majority of the money stuff to me. I manage the household finances. I think if I left it to him nothing would get done.

"We like to have a safety net and not just have to work a load of overtime to afford something. I’m afraid I’m of the opinion that there might not be a state pension when I retire, so I’m thinking long-term I need to have a bit of a nest egg. I pay just under 10% of my wages into my NHS pension.

"In the last twelve months we’ve been moving home so I’ve wanted to save a bit more money, so we haven’t done any holidays or anything. I’d like to better at budgeting too really and be able to save a bit more."

Stocks and shares go over my head

"I have no idea about stocks and shares. Sounds far too intelligent for the likes of me. From the things you see on the television, when it goes to stocks and shares I have no idea what they’re talking about. A bit like politics really. Goes over my head.

"Maths was never my finest point at school anyway. Don’t understand the terms and techniques and things. Having things more in laymen’s terms would help. It’s hard enough trying to get our house sold."

I'm not alone in worrying about mone

"We have life insurance but if I was ever to get really ill and have a long period of time off work I don’t really know how I’d pay for all of my financial commitments. Luckily with the NHS we get a really good plan where you can have up to 6 months off with pay, but after that… well, it is a niggle I worry about.

"I have a couple of best friends who I discuss money stuff with and it seems a lot of people just try to keep their heads above water. It’s hard enough trying to get our house sold but, yeah, it’s a lot of uncertainty and nobody knows what will happen. It’s scary. Very scary."

My biggest money question...

"I was given some inheritance money and didn’t know what to do with it. My mother-in-law suggested premium bonds and someone else said a cash ISA. Is this the best way to set up a bit of a nest egg?"

Answer by Lesley Mackintosh, Independent Women

First of all, congratulations - it’s great to hear that you’re thinking of saving your inheritance money for your future.

You haven’t mentioned your age, the inheritance amount, or what is important to you from these new funds – security or growth (or both). I’ve made a few assumptions based on the fact that you have said ‘nest egg’ – that this is for long term savings, meant to provide you with financial advantage at some point in the future, and a certain amount of security is involved.

Broadly speaking, when considering a windfall such as inheritance, it is good to get your ducks in a row first. Do you have any debts? Do you have a contingency fund – 3 to 4 months’ worth of your salary put aside in case of sudden expenses or redundancy/change in employment? Do you have any ‘wish list’ items – those things that are important to you but you have not had the affordability to buy in the past? This could include your education, a deposit on a home, or even a trip or one-off treat if it’s important to you.

Once you have set aside the money for these things, you will have a good idea of the remaining amount and the length of time you can leave your nest egg to grow for you.

What are premium bonds and cash ISAs?

Premium bonds and cash ISAs are both secure methods for depositing your money, and provide a lot of flexibility for you to access your money as and when you like. But they have a limit to the amount of protection afforded to any money you deposit, they generally provide very low returns (if any), and are likely to suffer the erosionary effect of inflation over time. By this, we mean that as the cost of living increases over time, the buying power of your money will reduce if it does not grow at least at the same percentage rate for the same period, meaning that you end up with less in effect overall.

Premium bonds can be purchased up to a maximum of £50,000. They are in effect a lottery with a tax break – there are monthly draws of anything from £25 up to £1M, with the winnings tax-free. Whilst there is a chance you could win big, there is also the likelihood that you might not and would therefore end up with the exact sum you paid in, without the benefit of any growth at all.

Cash ISAs are also a tax-free savings environment, currently allowing you to save up to £20,000 in any tax year. For any monies which you deposit above this level, tax is applied on any interest you earn at your usual income tax rate. The cash ISA provides a guaranteed but very small return which is limited to your bank’s cash ISA rate – currently up to 2.1% if you shop around and can commit to locking the funds away for 5 years. With inflation currently sitting at 1.9%, again there is little real growth over time.

What this means for you

If the amount of inheritance money you have falls within these limits, and if safety and security are the most important thing to you, then either option will achieve this for you. But both are rather like the old ‘cash under the bed’ scenario: safe, but going nowhere. At least, not unless you are lucky enough that your premium bonds come up a winner one month.

Some other options

If you are willing to lock the money away for 10 years or more, an investment such as a stocks and shares ISA or (depending on the inheritance amount you have) an open-ended collective such as a general investment account might be worth considering. These are stock market investments which can be tailored to suit your appetite for risk and interests, but must be regarded as a long term project and you must be comfortable with the fact that they will go up and down within that period. Over the full period though, there is a much greater chance that your nest egg will grow and reward you in the long run.

Depending on your age and property-owning status, you may also wish to consider paying off your mortgage or adding it to your pension.

Lastly...

There are quite a few options open to you but unless you are wanting fast and flexible access to your monies at any time, premium bonds and cash ISA could be considered poor options over the long term. There are many factors to be considered - it is an important sum of money so very important to take professional advice from a qualified and experienced financial adviser.

+ Holly Mackay's view

By Holly Mackay, CEO of Boring Money

Our Best Buy tables (https://www.boringmoney.co.uk/best-buys/all-providers/) show you some options for stocks and shares ISAs – you can see how other investors rate them and what our experience has been. Remember this doesn’t have to be a huge all-or-nothing decision. Most providers will let you start from amounts of £25/£50 a month so you can stick a long-term-but-small toe in the water and read up and learn ‘on the job’.