12th June 2014 at 9:53am
Who wants to be a millionaire?
Perhaps you’ve just completed our fun quiz entitled, Which Type of Lottery Winner are you? (If you haven’t, why not try it out here right now?)
In reality, though, whether you’d be a King of the Bling or a Filthy Rich Tycoon after your dream lottery win, you may have more chance of spotting a herd of pigs flying past a blue moon. The odds of winning the jackpot in the lottery are 14 million to one, so while it’s true that somebody has to win, we can’t help thinking there must be an easier or, at least, a more likely way to attain millionaire status.
Well there is.
It may not be as quick, and it’s certainly more work than nipping into the newsagent and picking 6 numbers. But if you invested the maximum annual contribution in the right ISA, after 30 years you might join an elite group of wealthy investors who have at least £1m squirreled away.
Ever since the government introduced the unimaginatively named Individual Savings Account back in 1999, dozens, perhaps hundreds of people have amassed savings in excess of the magic million mark starting with the Liberal Democrat life peer, Lord Lee, who was the first person to do it (you can read his story here).
The achievement of Lord Lee and his fellow ISA millionaires is not an impossible dream. In fact it’s realistically achievable for many people – the sooner you set up an ISA account, the more chance you’ll have of getting there – so why not start one today?
Here’s our 3 steps to ISA millionaire heaven:
1. Take out a Stocks and Shares ISA
To maximise growth potential over the medium to long term, as you set out on your journey to become an ISA millionaire, our Stocks and Shares ISA could be the answer.
This helps you to save smart – there’s no income tax for you to pay
if you invested the maximum annual contribution in the right ISA, after 30 years you might join an elite group of wealthy investors who have at least £1m squirreled away. on it, and no capital gains tax either. And you can take out our ISA in the time it takes to make a cup of tea.
Remember – unlike a Cash ISA, with a Stocks and Shares ISA the value of your investment can go up or down and may be worth less than you paid in. But the potential for growth over the medium to long term is greater than with cash.
P.S. ISAs are about to get even NISA; a “New ISA” (NISA) limit of £15,000 will apply from 1 July 2014. You don’t need to do anything, as all ISAs will convert to become NISAs with the higher limit and flexibility from 1 July 2014.
2. Pay in regularly
With ISAs, you can’t pay into your fund retrospectively after the annual deadline has passed. In other words, if you don’t use your allowance before 5 April in the tax year, you lose it. So decide the most you can afford annually and pay it direct from your bank account by monthly standing order or direct debit. After a few months, you won’t even miss it, but you may be surprised how quickly your investments can grow. If you haven’t reached the maximum allowance, you can also top-up your investments with lump sums whenever you receive a windfall.
3. The earlier you start, the better.
As this blog showed, the magical properties of compounding generally works best over long time periods, where you get growth on any previous growth. Put simply, the sooner you start investing, the more you could end up with at the end : you can never start too early.
Follow this 3 step plan and your ISA fund might top £1m during your lifetime. But even if your ISA doesn’t hit seven figures, it’s a better bet than any lottery ticket. Putting what you can afford away on a regular basis could grow into a sizeable sum.
This blog and any responses to comments are not financial advice.
Tax rules and legislation may change in the future. Any information provided here is based on our understanding of law and current HM Revenue and Customs.
For more information visit here.
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