A 28-year-old who started taking an interest in his finances during lockdown now has £20,000 squirreled away and is aiming to build it to £1million.
Matt Roberts, a scientific researcher, has switched his investments to an ISA.
He said: "Like a lot of young people, I started taking a bigger interest in my finances during lockdown. I wasn't happy about the returns on offer from my cash savings so I decided to invest in a stocks & shares ISA with Freetrade instead.
"Right now I've got just over £20,000 in my pot and I want to grow that into £1million. I'm targeting a return of 9% per annum, which might seem ambitious right now with all the volatility there is.
"But I'm committed to staying invested for the long-run. I don't want to be still working when I'm 65 if I don't have to and it would be nice to have the option of retiring early some day.
"At the moment I'm paying in £550 monthly, but it would be nice to be able to max out my allowance when I'm older."
Dan Lane, Senior Analyst at Freetrade said: "Hitting the seven-figure mark in your stocks and shares ISA is a great ambition to have. But, a bit like the most successful artists, sportspeople and business tycoons, getting there is all about doing the simple stuff well and consistently.
“Even if a £1m ISA isn’t in your future, the basic habits of monthly investing in a diversified portfolio informed by your financial goals still matters more than the amount in there. Getting starry-eyed at the big prize and not focusing enough on the groundwork may lead to decisions that are overly informed by short-termism."
Simon Jones, CEO of Investing Reviews, said: “With all the fanfare surrounding cryptocurrencies, it’s reassuring to see there’s a new tribe of young investors who recognise the tremendous wealth-building powers of the stocks & shares ISA.
“Assuming an average annual return of 7%, it would take an investor maxing out their £20,000-a-year allowance around 22 years to reach millionaires’ row.
“Someone starting their investing journey in their teens or early twenties could potentially amass a million by the time they are in their 40s. The roadmap to financial freedom has never been more clearly signposted.”
A poll of 1,000 ISA holders conducted by Freetrade and InvestingReviews.co.uk revealed that 14% of 18 to 24-year-olds expect to have a £1million fortune by retirement — compared with 4% across all age brackets.
Many of these young investors first appeared during the pandemic, with the acceleration of digital technologies making it easier than ever to invest.
Although cryptocurrencies have been popular, the poll’s findings indicate stocks & shares ISAs are also seen as an appealing long-term choice for those beginning their investment journey. 46% of people aged between 18-24 said investing in their ISA was a priority, far more than investing in cryptocurrency (32%).
While ISA millionaire numbers — currently 2,000 across the UK — are expected to grow significantly as investor pots compound, most respondents thought the £1million milestone would remain out of reach for them. On average, investors anticipated building a pot of £218,000 by retirement, while 41% didn’t think they would pass the £100,000 mark. Men were more likely than women to think a £1million pot was in their reach (5% v 2%).
The research also looked at the investment goals of ISA holders, with the majority (59%) saying they were investing towards financial freedom or retirement. Just over a third (37%) said their focus was on building an “emergency fund”. Other reasons included creating generational wealth for their family (19%), saving for a home (13%), and saving for a special holiday (12%).
Investment goals differed markedly between the sexes. Female respondents were twice as likely to spend their savings on their childrens’ education, wedding or to help them get a foot on the housing ladder (14% v 7%). And they were also twice as likely as male respondents to be saving towards buying their own home (17% v 9%).
