Making the Most of Your Inheritance Money in New Zealand

Receiving an inheritance can be both a blessing and a challenge. It presents an opportunity to improve your financial situation but also requires careful planning to ensure the money is used wisely. Here’s a comprehensive guide on what to do with inheritance money in New Zealand.

1. Take Your Time

First and foremost, take your time to process the emotional impact of your loss. There's no rush to make any financial decisions immediately. Allow yourself some time to grieve and only start planning once you feel ready.

2. Assess Your Financial Situation

Before making any decisions, evaluate your current financial situation. Consider the following:

• Debts: Do you have any high-interest debts that need to be paid off?

• Savings: How much do you have in emergency savings?

• Income: What are your current sources of income and expenses?

3. Seek Professional Advice

Consult with a financial advisor who can help you create a plan tailored to your needs. They can provide insights on tax implications, investment options, and long-term financial planning. If you have a lump sum you’d like to invest, please complete our investment discovery quiz and book in a call with Adam to discuss an investment strategy to suit your situation.

4. Pay Off High-Interest Debts

If you have any high-interest debts, such as credit card debt or personal loans, consider paying these off first. Reducing debt can significantly improve your financial health and provide a sense of relief.

5. Build an Emergency Fund

Having a robust emergency fund is crucial. Aim to save three to six months’ worth of living expenses in a readily accessible account. This fund acts as a safety net in case of unexpected expenses or job loss.

6. Invest Wisely

Consider investing the inheritance to grow your wealth over time. Some popular investment options in New Zealand include:

• KiwiSaver: Contributing to your KiwiSaver can provide long-term benefits, especially if you’re not yet retired. If you would like to contribute some or all of your inheritance to KiwiSaver, please talk to us about the fund you are in, switching to a different provider and fund can make a huge difference to your KiwiSaver returns over time. Complete our KiwiSaver Discovery Quiz here.

• Stock Market: Investing in shares or managed funds can yield higher returns, though it comes with risks. For personalised investment advice, please reach out to us or book a time to speak with Adam here.

• Property: Real estate can be a stable investment, providing rental income and potential capital gains.

• Bonds: Government and corporate bonds are lower-risk investments that provide regular interest payments.

7. Save for Specific Goals

Think about your future goals and allocate funds accordingly. This could include:

• Education: Saving for your children’s or your own education.

• Home Purchase: Using the funds as a deposit for a new home.

• Retirement: Boosting your retirement savings for a more comfortable future.

8. Give Back

If you’re financially secure, consider donating a portion of your inheritance to charity or some other meaningful community initiative. This can be a meaningful way to honour the memory of your loved one and make a positive impact on your community.

9. Enjoy Responsibly

While it’s important to be sensible, it’s also okay to enjoy a portion of your inheritance. Whether it’s a vacation, a new car, or a hobby you’ve always wanted to pursue, using some of the money for enjoyment can be part of a balanced approach.

10. Plan for the Future

Create a long-term financial plan that includes your inheritance. This may involve:

• Estate Planning: Updating your will and considering how you want to pass on your assets.

• Tax Planning: Understanding any tax obligations and minimizing your tax liabilities.

• Regular Reviews: Periodically reviewing your financial plan to ensure it aligns with your goals and circumstances.

If you would like professional help to plan your retirement, please complete our Retirement Planning Quiz here and book a time to speak with Adam about your retirement goals. Compound Wealth uses a retirement planning calculator to determine how much money you need for retirement over and above the pension amount.

Inheriting money can significantly impact your financial future. By taking a measured approach and seeking professional advice, you can make informed decisions that will benefit you in the long run. The goal is to use the inheritance in a way that aligns with your values and financial objectives.

Disclaimer: This blog post is for informational purposes only and does not constitute financial advice. Please consult with a financial advisor for advice tailored to your specific situation.

If you are interested in understanding more about investing or retirement planning please reach out for a chat here. Or you can complete one of our quizzes below:

Compound Wealth are based in Mount Maunganui, Tauranga and offer KiwiSaver, Investment & Retirement Financial Advice to clients all over New Zealand.