We’re all guilty of putting off until tomorrow things we could do today.
That’s especially true when it comes to sorting out our finances, where there’s no shortage of reasons to delay. Money you save or invest can’t be spent now and if you’re just starting out on your investing journey, the amounts you can put aside might seem insignificant. Then there’s all that admin to wade through, isn’t there?
These things can be enough for some of us to put off starting to invest - but that would be a big mistake.
Improving your finances through investing is a bit like improving your health through exercise. You won’t be running marathons on day one but if you keep taking small steps in the right direction you’ll be amazed at the progress you can make. The trick is to start in the first place.
If you’re feeling in need of some encouragement, the short video below is from our Invest for Life series. It features ordinary people - some seasoned investors, some novices - telling their own stories about starting to invest, what worried them at the outset and how they overcame their own obstacles.
Meanwhile, here’s some more reasons why there’s no better time to start investing than right now.
Getting in the habit
We’re all creatures of habit to some extent and investing is an example of when this can work to your advantage. You can start investing with as little as £50 per month into an ISA or £40 a month into SIPP (self-invested personal pension) but once that’s in place you have a base to build on and will begin to find ways to beef up that number.
Once a regular contribution is established it’s a simple task to tweak it higher. If you get a pay rise or promotion at work you’ll be able to put some or all of that extra salary in. If you manage to cut your everyday spending or costs, that’s also money that can be diverted into investments.
Making small, incremental increases to your contributions is how you’ll be able to save meaningful amounts in the long term - and all without feeling any large hits to the money you have to live on each month.
Maybe you think you’ll get round to investing one day, but that now’s not quite the right time. Perhaps you think it’s best to wait until you’re earning more money.
But doing this means that you’ll miss out on one of the biggest boosts to investment returns - time.
Compounding means your investment returns are added to your total, and then a return is made on that return. The result is that in the long term your pot can benefit more from investment gains than from money you’ve contributed yourself. Delaying means you cut the opportunity for this to happen.
Research from Fidelity helps show the cost of waiting before you invest. A 25-year-old earning £30,000 and wanting to retire at age 68 would need to set aside 13% of their salary into a pension in order to build a pot big enough to maintain their lifestyle in retirement.1
What if they waited until they were 35 before they started? By that point the research assumes that their salary will have risen to around £44,000, yet even with that higher level of earning the contribution they would need to make to hit the same retirement target will have grown to 18%.1
The longer you wait, the more ground you’ll have to make up.
Easier than you think
A big obstacle to investing for many is the admin involved and the choices that are required. In reality, however, both tasks are easier than you think.
You can open an account - an ISA, SIPP or General Investment Account - in just a few minutes online. You’ll need your personal details and National Insurance number. Once that’s done you can monitor your investment accounts just like an online bank account and can set up regular payments at a level of your choosing.
You need to specify the investment you want, of course, but there’s plenty of help here as well. Fidelity’s Easy Invest option allows regular payments from £50 a month into an ISA, with your money invested into a low-cost index tracker fund. That means a fund which splits your money between the shares of hundreds of the largest companies across global stock markets.
Alternatively, you may want to invest according to your appetite for risk. The Fidelity PathFinder tool will suggest a fund to suit your risk level, splitting your money between shares from around the world, bonds which are less volatile, commodities like gold and commercial property.
Watch more Invest for Life videos
1Fidelity International, based on inflation of 2% each year, household income rising 3.75% each year (or 1.75% above inflation) and investment growth of 4.75% each year (or 2.75% above inflation) before retirement at aged 68 and 4% investment growth each year thereafter (or 2% above inflation) for the rest of your life.
Important information: The value of investments and the income from them can go down as well as up so you may get back less than you invest. Tax treatment depends on individual circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
What you could do next
Explore regular saving
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