A savings expert has urged people to consider opening a stocks and shares ISA to build up for their long-term financial goals and beat inflation.
Miranda Seath, director for Market Insight & Fund Sectors at the Investment Association, told Express.co.uk: “Stocks and shares ISAs provide a great, tax-efficient way for people to save for their long-term financial goals, whether that’s saving for a property or retirement, or just putting aside money for a rainy day.
“Each year, an adult can save up to £20,000 into an ISA and £9,000 into a Junior ISA on behalf of their children, tax-free.
“Although only a small percentage of savers will max out their annual ISA allowance, even investing a small amount of money on a monthly basis can make a difference in the long-term.”
ISA rules were liberalised from the start of the tax year and now you can save into more than one of each type of ISA each tax year, meaning you can have several stocks and shares ISAs.
Stock and Shares ISAs provide a great, tax efficient way for people to save for their long-term financial goals, whether that’s saving for a property or retirement, or just putting aside money for a rainy day.
“Each year, an adult can save up to £20,000 into an ISA and £9,000 into a Junior ISA on behalf of their children, tax-free. Although only a small percentage of savers will max out their annual ISA allowance, even investing a small amount of money on a monthly basis can make a difference in the long-term. If you invest, you benefit from the magic effect of ‘compounding’ on the return you make on the initial amount invested. The longer the money stays invested, the faster the growth on the accumulated annual investment returns. So, investing £1000 now at the start of the tax year can make a bigger difference to growing your savings than investing £1000 just before the end of the tax year.
Ms Seath said the savings account can deliver impressive returns. She explained: “If you invest, you benefit from the magic effect of ‘compounding’ on the return you make on the initial amount invested.
“The longer the money stays invested, the faster the growth on the accumulated annual investment returns. So, investing £1,000 now at the start of the tax year can make a bigger difference to growing your savings than investing £1,000 just before the end of the tax year.
“Over time, savers must also consider the impact of rising inflation on their savings too. Our research shows that if a saver put away £10,000 in a cash ISA in 2003, inflation means that the purchasing power of that £10,000, even after adding interest, is £8,448 in today’s money.
“If that saver had invested the money in a fund investing in the shares of global companies, even after inflation, that £10,000 would now be worth £18,140.”
She encouraged people to be proactive with managing their finances even if it can seem a daunting task at first.
The expert explained: “Many people start their journey into investing because they want to reach a financial goal, often saving for their first property, or because they have been given a lump sum of money.
“They can find stocks and share ISAs on any of the major investment platforms. Investment platforms provide helpful research and tools that guide investors into the right type of funds to invest in through an ISA.
“Digital tools can also help investors to understand how much risk they are comfortable with taking and how that could affect their fund choices.
“If savers are really unsure about where to start, there are apps that simply round up and invest the difference on a cup of coffee so that investing becomes part of everyday life and savers start to see the impact that incremental investing has on building their savings pots.”
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