The Importance of Saving into an ISA from a young age

The Importance of Saving into an ISA from a young age [ad]

Saving into an ISA has always been an important part of my financial strategy and it’s something I have chosen to invest in from a young age. I wanted to share my story of what I did and how it helped me in later life.

My First ISA aged 22

I graduated from university way back in 1999, aged 22 and started my first job for a bank in London. One of the very first things I did when my first pay day arrived, and I remember it very clearly, was to investigate the savings market and find a product that I could invest in on a regular basis. I opened a stocks and shares ISA and set up a direct debit to pay in £25 per month. I probably could have afforded more, but I imagined that £25 per month would turn into a nice chunk of money 10-20 years down the line.

saving into an isa

It was always my intention to build a fund long term, maybe for retirement as at that age of 22 I was too young to invest in the company pension scheme. Or maybe as a fund to put to good use later in life. Its brilliant to start investing like this from such a young age.

At the time interest rates were much higher than now on cash ISAs but the stocks and shares ISA looked to provide a better return. All I had to do was choose a fund, I went for the FTSE 250 companies to base it on. The ISA was opened and I forgot about it.

Life Continues but circumstances change

Life continued for many years. I changed jobs a few times, I moved counties a few times and eventually settled down got married and started to have babies. By the time I was pregnant with baby number three we decided that our house wasn’t big enough and to move would cost a small fortune so we decided to extend our three-bedroom house.

We needed 70k to do everything that we wanted to do. Some of the money was taken out of our house as equity release and then we used the money that had built up in the stocks and shares ISA to add to the pot as well. The £4,000 of money I had invested at just £25 per month and had turned into around £8,000. A great help towards to the cost of the extension. It turned out to be a very sensible investment that increased even more in value as the 70k investment in the house added on £110k worth of value.

top tips for selling your house

I am a firm believer in putting away an amount of money every month be that whatever you can afford and to do it from as early as age as possible. Most of us could put away just £50 per month, couldn’t we?

What Changes can you make to start your Savings?

There are so many simple changes you could make to free up the money and start the regular savings into an ISA.

  • Swop your daily coffee and bring a cup from home instead. This could save you £40 per month at £2 per day
  • Bring in packed lunch to work maybe 3 days per week. A saving of £60 per month at £5 per day.
  • Swop your food shop to a lower priced supermarket, why not give Aldi or Lidl a go, you will be pleasantly surprised by the quality of food and the savings. I saved £40 per week and £160 per month when I swopped from Tesco to Aldi.
  • Compare the price of your gas and electricity provider using a comparison website. If you haven’t done this before or not for a couple of years, there will more than likely be a saving to be made. I make this swop every year but still managed to save £25 per month from the monthly bills at the end of last year.
  • Take a close look through the direct debits on your account, is there anything there that you don’t use that much that you could maybe do without? Maybe that Netflix subscription or that gym membership? If you are not getting value for money from the service and not using it enough, cancel it.

There you go, lots of idea’s to strip a chunk of cash from your monthly savings that could be nicely invested into a stocks and shares ISA.

Why Invest in Stocks and Shares ISA’s rather than a Cash ISA?

Interest rates remain at an all-time low which means that cash ISAs are not worth investing in at the moment. Switching over to the stocks and shares ISA gives you a better chance of getting higher returns on the money you have invested. With a Fidelity Stocks and Shares ISA
you can save as little as £50 a month, and you can choose your funds with helpful online tools such as PathFinder and Fidelity’s Select 50 list of recommended funds.

Now is a great time to invest in an ISA at the beginning of the tax year and set up a regular direct debit into the ISA every month.

Important Information

The value of investments can go down as well as up so you may get back less than you invested. If you are unsure about any investments then please speak to a recommended financial advisor.

This was a collaborative post.


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Lynn Beattie

Aka Mrs MummyPenny

Personal Finance Expert

I write about personal finance made simple, lifestyle choices that will save you time and money, as well as products and services that offer great value.

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