Resist having that second gin and tonic in your favourite bar and you could be on the right path to a nice deposit for a new home or a cushy retirement - without the need to become a hermit.
Gin and flavoured cider have entered the Office for National Statistics' Basket of Goods and Services, which is a posh description for the typical weekly shop. They are easy targets for cost-cutting, in our view, leaving you with more money to save for the future.
We recently explained our top tricks to get the most out of the Lifetime ISA, so you’ve no excuse not to start using the new savings and investment wrapper when it launches next month.
You get free cash from the government as an incentive to save.
Even people over the age of 40 can benefit from the new ISA, despite not being eligible to have one. Read our article to find out how the over-40s can help others.
IT IS EASY TO SAVE
If you’ve developed a taste for gin and go out once a week and spend £50 on each occasion at your favourite bar, cut this jolly down to once every fortnight to instantly save £100.
By saving that extra £100 monthly in a Lifetime ISA, the UK government will top this up with a 25% bonus, which brings the total to £125 every month.
You can build up a pot worth £18,000 in 10 years simply by putting away £100 (+ the government’s free cash) in an investment fund or stocks that return 4.5% on average each year.
That’s amazing considering the small investment you need to make every month. So cut back on the gin!
A FEW THINGS TO THINK ABOUT
We’ve done the calculations using Aviva’s online investment calculator. It deducts 0.75% charges each year from the returns which is a fair representation of investment platform fees and some fund management charges.
You will need to consider that certain investment products can have higher fees, so don’t assume the £18,000 figure is guaranteed after 10 years.
Our example is a simple illustration to help you think twice about your personal spending habits and how your hard-earned money could be put to better use in the markets.
Investors need to take into account that the government bonus on a Lifetime ISA is paid annually after the first year and then monthly.
Also, don't forget that equities are risky and can underperform, which can affect annual returns so be prepared for volatility.
WANT MORE INFORMATION?
If you’re interested in the Lifetime ISA, don’t forget to read our article explaining everything you need to know about the new savings and investment wrapper.
We normally keep our best material exclusively for paying subscribers; today we’re feeling generous and have opened up access so anyone can read the article for free.
