The simple act of saving £1 a day could build a savings pot over time
Social media is full of ‘savings challenges’, urging people to push up the value of their nest eggs by doing everything from stuffing envelopes with money to having ‘no spend days’. But for those planning to make the most of a tax-free savings allowance in an Isa, the simple act of putting away £1 a day could build a healthy savings pot over time.
By putting £30.42 a month (the equivalent of £1 a day) away in an Isa with a 5% growth rate, you would have more than £2,000 in five years, more than £4,700 after 10 years and in excess of £18,000 in 25 years. If you invested your Isa money and it grew faster, perhaps at 7% a year on average, you would have £5,265 after 10 years and £24,642 after 25.
What happens to £1 a day when you just add time
(Picture: Bestinvest)
Slow and steady wins the race (Picture: Getty Images)
On the other hand, £1 a day in an Isa is a far more achievable goal, and the graph above shows how your cash could add up. ‘The first £1 you invest will always be the most valuable one, as it has the longest time to grow from an acorn into an oak tree,’ adds Jason.
Be aware though, that with investing, there’s always a chance you might actually get back less than you put in. Investing means the value of your investments will go up and down depending on how well the underlying stock markets are doing; if the stock markets go up then so will the value of your investment, and vice versa.
Bex and Jake Spiller used their Lifestime Isas to buy a three-bed semi-detached house in Kent – and were grateful for the government bonus which helped them to buy. Under-40s can put up to £4,000 a year into a Lisa until they are 50, receiving a government top-up of 25%.
‘My parents passed away when I was young and I didn’t have any inheritance or anything like that, so it was really nice to have that little bit of extra help,’ Bex says of the Lisa. ‘I just wish we’d had one for the five or so years we had been saving before that.’
A Lifetime Isa could net you a £50,000 deposit over 10 years, assuming an investment growth of five per cent per annum
(Picture: AJ Bell)
Everyone can save £20,000 a year into an Isa and allow this to grow tax-free, but of course, putting aside more than £1,666 a month is often (to say the least) unrealistic.
Jason Hollands, managing director at DIY investment group BestInvest, says that even £1 a day is enough to put yourself on track to have a healthy nest egg in months or years to come.
‘The key thing is to stay the course,’ he says. ‘Steadily saving and investing, even modest amounts of money, can really clock up over time as you make gains not just on the amounts originally saved but further growth on the past gains too – this is called “compound growth” and Albert Einstein described famously it as “the most powerful force in the universe.”’
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