How could £48,000 grow into £72,000?

Let’s say you managed to save £48,000 over 20 years. It’s not a life-changing amount. It won’t let you retire early. It won’t buy you a Ferrari or a penthouse with a view. But it is an achievement. And it is amount that could help you achieve a specific financial goal – like a house deposit for your child or the trip of a lifetime for future you.

The challenge is that over long periods of time, inflation quietly erodes the value of money. What £48,000 buys today is unlikely to buy the same in 20 years’ time. Even when cash earns interest, it can struggle to keep pace with rising prices.

What if there were a way for your £48,000 to grow into significantly more… (without putting it all on number 5 in the 3.10pm at Chepstow - something we don’t encourage)? Would you be open to that?

Of course you would. The good news is that the way to do it is probably simpler than you might think.

It essentially boils down to investing regularly through a Stocks and Shares ISA and letting time work its magic.

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Why £48,000 - and where does that number come from?

It’s the amount you’d have contributed if you saved £200 a month for 20 years. I’ve used it because it felt like a real target for real people.

If you’d chosen to put it into a bank account, you’d have earned some interest. But once inflation is taken into account, the real value of your money may not have grown by very much.

If, however, you’d invested that money into a Stocks and Shares ISA, reinvested any income and stayed invested, your money would at least have had the potential to outpace inflation over the long term – and could have grown to around £72,000, assuming 5% annual growth.

On this basis, your £48,000 could generate around £24,000 in tax-free growth. Of course, growth isn’t guaranteed. And the journey over the 20-year period is unlikely to be smooth. The value of your ISA will almost certainly dip at times. With patience and self-control, time can help smooth out those ups and downs, giving your investments time to recover and grow over the long term.

That’s what a Stocks and Shares ISA is designed to do.

What if I’m looking to save more than £72k?

Our ISA calculator can show what your money could do over time.

Let’s say you choose to save £500 a month for 20 years. It means you put in £120,000. At a 5% annual return, that could grow to roughly £180,500 – assuming you stay invested throughout.

Push those contributions to £1,000 a month and you contribute £240,000 over the same period. In this case, your pot could grow to around £361,000.

And because you’re saving in an ISA, this growth is currently free from UK income and capital gains tax.

Have a play with our ISA calculator yourself - but here’s the type of returns you might expect at 2%, 5% and 8% growth over time if you stay invested and reinvest any income from your investments.

The figures below are illustrations to show how different rates of return can affect investments over time. Markets don’t deliver steady returns year to year, and actual outcomes will vary.

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Are you making the most of your ISA?

Many higher earners are conscientious pension savers but don’t take advantage of the tax perks that ISAs offer. In many ways it’s a missed opportunity, because ISAs offer flexibility that pensions don’t - particularly around access.

And yet ISA allowances often go unused or underused. Not because people can’t afford them - but because the benefit doesn’t feel immediate. The cost of that decision only becomes obvious much later.

So, final thoughts?

An ISA won’t make you rich overnight. But used properly – and as long as saving in an ISA suits your goals and circumstances – and you save consistently and patiently, it has the power to make a significant impact on your financial goals.

The key is knowing what you’re investing for, and being comfortable staying invested through the inevitable ups and downs along the way.

And if you can do that, then – just like the best stews – an ISA can really come into its own with time.

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Got a burning question you want to ask? Why not drop us a line. Click here to ask your question.

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Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. 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 one of Fidelity’s advisers or an authorised financial adviser of your choice.