Investing for your future has to start somewhere. You can start with as little as £100, but the main thing is start today. You’ll be surprised how little amounts can not only build up and start earning the compounded interest we’ve talking about on the Investing section often but it’s a great motivator to continue investing.
Motivation is the key. Watching your money grow for your future has a certain allure and addictiveness. Standard government pensions are notoriously going to diminish. They can’t ever disappear entirely as pensioners once they retire need shelter and food. This has to come from somewhere, but you’ll have seen recent legislation change where employers must contribute towards their employees pensions.
The government realise the volume of people in the age bracket for pension payment is increasing as each generation reaches it. Age increases before reaching that pension bracket can only increase so much. Therefore, it’s best to think now. Invest now and plan for a better future.
What should you do if you have £100 to invest in 2020?
With the age of the internet your options are plenty, and due to the competition in the markets the fees are comparably low.
Now we are not able to provide financial advice. We can’t tell you where to invest your money. Investment comes with risk and you need to make sure you’re comfortable with your investment, understand the risks and seek independent financial advice if needed.
Just putting your £100 into a standard savings bank account will give you around 1% per year depending on the amount held. This means just £1 over the year. Put £100 in to a UK bank at a rate of 1% and after 10 whole years your reward will be just £10.46 in interest!
You can see why people look for other opportunities to make their income work harder.
Stocks and Shares ISA
To those new to ISA’s it’s worth researching first. There are plenty of Government and Bank guides to ISA’s and the latest and current rules and benefits.
Further Information: -> Government’s Guide to ISA’s 2020
An ISA (which stands for Individual Savings Account) gives everyone the ability to invest up to a certain amount each year (currently at £20,000 per annum) and not have to pay tax on earnings or interest payments.
By law any interest you earn you must declare the amount and pay tax on it. It’s considered an income just like any form of income like your salary. An ISA was created by the Government to encourage savings and investment by allowing everyone to save and not pay tax on interest or earnings.
It is worth looking at performance records of ISA Stocks and Share providers. Each has a different way to manage your portfolio of shares (if you chose for your provide to manage your ISA for you, which is always advisable for those starting out). A managed account usually warrants a fee to the provider of around 0.5%-0.75% but this can vary. This could mean you pay 50p-75p fees for a managed stocks and shares ISA investment of £100.
So, let’s assume you invest just £100 today, and manage to achieve an average of 5% interest rate in a stocks and shares ISA. After 10 years this would, at this interest rate, be worth £162.89.
This may not sound a lot but compare this £62.89 interest and earnings to the £10.46 in the above example in a bank account. It’s 6x more.
If you were able to put aside £100 a month (£1,200 a year to add to your investment) after 10 years this could be worth around £15,101.23. In a standard bank account this could be around £12,555.75, which is around £3,000 less!
This is from an original investment of £12,000. Earnings from a 5% stocks and shares ISA are around £3,000 compared to £555 from a bank account. Again, around the same 6x more.
Remember rates are not guaranteed and you could end up with less money than you invested.