Make a wad from your windfall

What should you do with a lump sum? For those of you with a stash of cash but no idea of how to make it grow, help is at hand...

I've had enough of the doom and gloom, personally.

Yes, we are mired in a miserable recession, and they are pretty depressing things. But times of adversity invariably present opportunities.

It goes without saying that the 100,000 workers being made redundant each month are hardly jumping for joy, but many of those workers will have been sent on their way with a lump sum redundancy payment.

Chances are they are now wondering what to do with that money.

They are not alone. If you have saved your pennies over the years, or have come into some money, then now is a pretty testing time to work out what you should be doing with a healthy lump sum.

Well, fear not, because I've put together a guide of the best ways to get the most from your money.

Time for a bond

Easy access savings accounts have offered pretty rubbish returns for a while.

But if you have come into some cash that you don't need immediate access to, a sensible move at the moment is to lock that money away for a few years.

My favourite bond at the moment is the five-year online bond from Barnsley building society, paying a massive 5.4%. That's the market-leader, and is miles more than you will get from an account that offers regular access to your cash.

Indeed, if you put £25,000 into this account, even without adding to it each month (which you can do free of charge) by the end of the five years, you will be looking at around £32,500, before tax.

But there are a host of other bonds you can invest your money in, for many different timescales, from a year to ten years!

>>Compare the market's best bonds at lovemoney.com

The savings route

The great thing about having a large sum to lock away in savings is that it opens up new options.

My meagre savings limit my choices, but if you have £25,000, then you can take advantage of the Investec High 5 account.

I really like this account, as it takes the stress out of worrying whether you are getting a decent return for your money. The account pays the average of the five highest savings rates in the market, updated on a weekly basis. So though you'll never get the best return on your money, you will ALWAYS get a great rate.

It's currently paying a lovely 3.17% - a rate which is only going to go up once interest rates start to move up again, which they will eventually.

One thing to remember if you do have a large sum of cash to invest is to make sure ALL of it is covered by the Financial Services Compensation Scheme. This scheme only covers the first £50,000 of any savings, so if you have more than that to lock away, make sure you spread your savings across more than one bank.

Speculate to accumulate

Saving the money is not your only option for making it grow - you can invest it.

One option is to look at shares. If that sounds like your cup of tea, then I would recommend you check out The ultra cheap way to invest in shares.

Alternatively, if you have an outstanding mortgage, then now is the right time to be overpaying, to stave off the threat of negative equity. You could do a lot worse than putting some, if not all, of your windfall into helping to pay that mortgage.

You may face a charge - although most lenders only allow you to overpay by 10% before hitting you with a penalty. Use our overpayment calculator to do your sums on your own mortgage to see whether it works out in favour of putting that money into your mortgage.

Investing in property

Now is also an interesting time to consider investing in property.

Recent house price movements suggest we may have hit the bottom of the housing crash, and with housebuilding slowing to a halt, the undersupply of property is likely to help those prices start to move upwards again.

Personally, if I were to invest in property at the moment, it would be for the long-term as a landlord rather than in the hope of making a fast buck from capital appreciation. An awful lot of speculative investors have had their fingers badly burned over the last couple of years having attempted just that.

Learn from their mistakes!

If you are interested in the prospect of investing in property as a landlord, then I'd recommend reading Five steps to becoming a (great) landlord!, as well as following the tips in our goal, Become a buy-to-let landlord.

Consider the alternatives

Looking beyond the obvious options can offer a far greater return for your money.

One option is to explore the possibilities of lending out your money, through Zopa. This clever site allows you to choose what rate you want on the money you have lent out - in fact the average rate Zopa lenders have made on their money over the past 12 months is a fantastic 8.2%!

If Zopa doesn't take your fancy, then you can actually put your cash to an auction of banks thanks to sites like MaxBips or Licuro.com. Instead of putting your money into a bank account, you inform the site of how much money you are happy to deposit, and for how long.

The banks then make their bids, and you choose which one to go with (though there's no obligation to hand it over, even after the bids have been unveiled). To find out more on how you can make a few bob out of these clever sites, you should have a read of An innovative way to earn 8.2% on your cash!

If you do have a nice wad of cash at your disposal, the worst thing you can do is sit back and rest on your laurels. There are plenty of options out there are the moment which offer a super return for your cash, so don't miss out.

More: Avoid the top two savings accounts! | House prices WILL increase this year