This year marks the 20th year of ISAs. ISAs are a great way to invest and they have tax benefits too! You are allowed to pay in £20,000 per annum into an ISA now and if the investments that you pick go up in value, then the growth on the ISA is tax free.
Over the last few years, I am seeing more and more ISA millionaires walk through my office door. It is estimated that there are now more than 1,000 ISA millionaires in Britain**. So how did they do it and what do you need to know to do the same?
How ISAs work:
- Think of the ISA as the wrapper i.e. the box where you put your money.
- Inside the wrapper, you then pick investments.
- A fund is a group of investments. The funds are managed by fund managers who make the day to day decisions on what investments are in the fund.
- The investments can go up and down depending on what is happening in the markets and also how good the fund managers are at picking the investments.
ISA Millionaire Top Tips:
- If you can afford it, invest the full allowance for each tax year.
- Reinvest dividends automatically.
- Invest for the medium / long term.
- Stick out the tough times – make sure you are calm and patient. Knee jerk decisions don’t usually pay off.
As always it depends on when you start and how much you pay in so here is a quick table to help you guestimate what you should be paying in:
| Starting Age | Monthly Investment | Fund Value at 65 |
| 22 | £433 | £1,000,000 |
| 25 | £525 | £1,000,000 |
| 30 | £729 | £1,000,000 |
| 35 | £1,027 | £1,000,000 |
| 37 | £1,184 | £1,000,000 |
| 40 | £1,479 | £1,000,000 |
| 45 | £2,206 | £1,000,000 |
| 50 | £3,486 | £1,000,000 |
| 55 | £6,155 | £1,000,000 |
This table assumes a net growth rate of 6% (which will be realistic for some people and not for others) but the point is that the earlier you start the more likely you are to achieve the goal. The slight flaw in the above, is that the contributions that you would have to pay in for the 45/50/55 year olds is more than the current £20,000 allowance.
The reality is that most people will never become ISA millionaire. The point of this post is not to make you feel bad if you can never achieve it, but to inspire you to invest more.
So what could you do to get closer to this? What could you cut back on? Could you earn more? Let me know your thoughts?
Lots of Love
Miss Lolly xx
*Please remember – the value of your investments can go down as well as up, so you could get back less than you invested
**https://www.moneywise.co.uk/investing/stocks-shares-isas/how-become-isa-millionaire
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