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What should I do with my redundancy money?
Many redundancy payments are relatively modest and will only help tide you over until you get another job. But with long service or a redundancy payment greater than the legal minimum, you may get a tidy sum.
A redundancy cheque might be one of the biggest amounts of money you have received in one go, and it can be very tempting to spend it! If you know you have another job to go to, this may be reasonable. Or you may want to use the money to take time out from working while you study or retrain for a new career.
Other people may want to use the money to set up in business. Others may want to consider themselves as retiring early.
But you should think carefully about your financial situation and take advice from an independent financial advisor before making any hasty decisions, particularly if significant sums of money are involved. The Money Advice Service has some suggestions to consider.
Typical advice would be to first put your redundancy payment into a high interest savings account while you consider what to do. Many newspapers and websites publish the accounts currently paying the best rates. Some of the best accounts may well only be available online or by post, rather than your high street.
The next step may be to look at your outstanding debts – such as credit cards and your mortgage – and consider paying these off, as they are likely to cost you more in interest than you can earn through savings.
After that, if there is any money left over, you will want to save it in a way that helps your long-term security. You are likely to be advised to keep some in an emergency fund that you can get at easily, with the rest in longer-term savings that minimise the tax you have to pay.
But the best options for you will really depend on your own individual circumstances. That is why taking independent financial advice is recommended if you get a sizeable redundancy payment.