Who wants to be a millionaire?

Who wants to be a millionaire?

Reaching millionaire status can seem like an unachievable ambition for many people. It sounds like a lot of money - and it is. 

But it is actually well within the grasp of dedicated savers who start putting cash aside as soon as they start earning - especially if they invest in a tax-efficient Isa (where returns are free of tax charges) or a self-invested personal pension (Sipp) which comes with invaluable tax breaks.

Most youngsters might prefer to use an Isa where they can still access the cash rather than locking it away in a pension that can’t be drawn on until age 55.

Assuming the annual tax-free Isa allowance stays as it is today at £20,000, and that you see 7% returns, a saver could see their Isa pot exceed £1million in about 22 years.

Of course, not everyone has £20,000 a year to spare to stash away for the future. But these calculations will give you an idea of how it can be achieved.

For those without that kind of saving capacity, it’s important to know that putting a little something away every month is better than doing nothing.

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You won’t reach Isa millionaire status by saving £50 a month, but every little helps

Investing £50 a month could grow to £8,600 in 10 years, £25,520 in 20 years and £58,800 in 30 years.

Doubling that to £100 a month would see your savings grow to £17,200 in 10 years, £51,040 in 20 years and £117,610 in 30 years. Boosting that to £200 a month would see the total fund grow to £34,400, £102,080 and £235,210, respectively.

As well as having the discipline to save each and every month, being a smart investor is key to your successes and to getting closer to that millionaire status. There are lots of important strategies that contribute to growing your wealth.

Rather than investing one lump sum and letting it grow, a regular savings habit is a solid investment strategy. Not just because your own money will add up over time. Investing a regular amount of money can smooth out the highs and lows when it comes to share prices. When they go up, the value of your stocks rise, and when they go down your next contribution buys more. 

Equally, leaving money untouched and reinvesting returns is crucial to growing your wealth, thanks to compound interest. This is the term for earning interest on interest or more specifically in investment terms, generating income from previous income.

It’s also crucial to ensure you have a balanced portfolio. The idea behind diversification is that if one investment has a bad time you will always have others that will ideally not be suffering, so they act as a counter-balance.

How you invest your money is of course crucial to growing wealth to £1million.

It is possible to own shares in a company directly, so your money will depend on the success of the chosen firm. If you had invested £1,000 in Apple 10 years ago, that money would now be worth around £15,000.

Of course, it’s also possible to lose some or all of your money, should you back a dud company.

Instead of buying shares in individual companies you could opt to save your money in a fund which offers the opportunity to invest in lots of different stocks in a single investment.

Money is pooled with that of other savers and invested by a fund manager in many companies, which also spreads the risk.

These can be UK based, or companies in other countries or regions, in many different industries and sectors.

You might be a little apprehensive about risking your money in the stockmarket. 

But remember that stashing money in a savings account won’t get you far.

To show just how much you stand to lose by ignoring the stock market - should that £1,000 have been placed in an average bank or building society account 10 years ago, today you would have just £1,080.

If you have invested £1,000 10 years ago in a fund which tracks the UK stock market, you would today have around £2,400. 

There’s now an estimated 1,000 Isa investors in the UK who have been so dedicated to a regular savings habit and stock market investing that they have managed to reach Isa millionaire status.

If you want to try and join the club - or just start investing for a secure future - it’s easy to set up a stocks and shares Isa.

You can go to the high street but the best value when it comes to charges and choice of funds are online with a fund supermarket. You can find the right one for your circumstances using website www.comparetheplatform.

If you want help with choosing investments, website unbiased.co.uk offers a directory of local advisers that can be found by entering a postcode. Another website worth visiting is vouchedfor.co.uk where clients leave reviews of their experiences with adviser firms.

Remember - the sooner you start saving, the better your chance of hitting that million.

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