Investing is often thought of something only for the wealthy, but is that really the case? As we move in to more volatile times, with a rising cost of living and domestic unrest, savers might be deterred from putting away the small amounts they find themselves left with over the month, but we have found that investing even a little could still be a safeguard for your future finances.
Our investigation in to the saving and spending habits of the nation has found that 46% of those aged 25-34 save less than £100 each month, rising to 53% among 35-44s. In our study, involving over 20,000 people, the ‘little and often’ crowd may stand themselves in good stead when it comes to a nice nest little egg.
We know that times are tough and with the rising cost of living, only being able to save a small amount isn’t surprising. What do these little chunks actually mean? We’ve crunched the numbers to find out whether this modest savings habit can really help you reach your long-term goals.
With just £100 each month, equivalent to around £3 each day, you could build a substantial fund. We took in to account a comparison of high street savings accounts and the UK top 100 equity index, and the results show that £100 invested each month into the UK top 100 equity index over the last two decades, including gains, would now be worth £41,052. This is based on an investment from 01.06.1996 till 01.05.2016.*
Those with modest amounts left over at the end of the month should not be dissuaded from investing and may be surprised at the potential to accumulate a large pot of cash at just £3 a da – the price of a high street coffee.
Ask the Experts
Our Managing Partner, David Harrison said: “There is a myth about investing that it’s for the rich, but that is simply not true. Household budgets remain under pressure and parents in particular may worry about how they can help their children to get through university or onto the property ladder.
“Someone in their 30s or 40s with young children might be surprised that regularly saving £100 could build a £41,000 pot. That could pay for a deposit on a home purchase or help with kids’ university fees.
“The key to beating bank interest rates and making the most of modest amounts is to invest little and often with gains reinvested.”
There is growing evidence that savers are opting to make micro investments as a way of seeking better returns than those on offer through traditional savings accounts on the high street.
David added: “Someone with £50 or £100 left over at the end of the month would probably just put that into a savings account at the bank. Up until recently, investing small amounts has been too costly even though the returns are usually better.”
At True Potential, we believe that everyone can become an investor and we make it possible by taking care of the small amounts. Our world-first impulseSave® technology helps investors top up their investments from just £1 and so far three quarters of all impulseSave® payments are for £50 or less. Speak to your adviser about starting your ‘little and often’ journey.
*Source: Bloomberg. May 2016
With investing, your capital is at risk. Investments can fluctuate in value and you may get back less than you invest. Past performance is not a guide to future performance. Tax rules can change at any time. This blog is not personal financial advice.