You've got a redundancy payment: what to do with the money

First 48 hours: park it

• Put the money in a savings or on-call account at a registered bank. Don't invest, lend or commit anything for at least a few days.
• Check how it was taxed (see the tax guide). The payment may have been taxed at a high 'extra pay' rate; some may come back at year end.
• Tell anyone you share finances with. Don't let people pressure you for loans.
• Beware cold calls, adverts and 'advisers' who show up after a redundancy; some are scams.

Work out your runway

This is an illustration. Use the Money Runway tool to try your own numbers and see how things change if you find work in 4, 8 or 12 weeks. Remember: if the sum puts you over cash limits for any Work and Income help, find out what applies before spending it.

A sensible order for using it

1. Cover essentials for 3 to 6 months (rent/mortgage, food, power, transport, insurance).
2. Clear overdue bills, fines and priority debts.
3. Pay off high-interest debt (credit cards, store cards, payday). Interest rates over 15% are almost always better paid off than invested.
4. Consider paying down a mortgage only if you can keep a buffer; extra mortgage payments can be hard to get back out. Check with your lender whether you can redraw.
5. Retraining or moving costs that raise your hiring chances.
6. KiwiSaver top-up is the last step, not the first, because the money is locked in.

If you want to invest

• Don't invest money you need in the next 1 to 3 years. Bank term deposits, savings accounts and Government bonds are lower-risk but lower return. You'll pay tax on interest at your tax rate (PIR).
• Index funds and managed funds are for money you won't need for 5 to 10+ years.
• Be very cautious with opportunities pitched to you by friends, 'crypto', property syndicates, or business franchises.
• Only use FMA-licensed providers and certified financial advisers (check the Financial Service Providers Register). Sorted has free planners.
• Don't lend big sums to family without writing the terms down.

Tax, student loan and benefit side-effects

• Student loan: a lump sum increases your income for the year, which can mean an end-of-year student loan repayment.
• Working for Families and other income-tested payments: updating your income estimate with IRD stops overpayments.
• KiwiSaver: check whether KiwiSaver contributions were deducted from part of the payment.
• Jobseeker Support: the redundancy payment affects the stand-down but, unlike wages, usually isn't counted as ongoing income. Check with Work and Income how your particular payment is treated.