What’s the best way to spend loose cash? If you find yourself with a little extra cash available after all the bills have been paid, you might be wondering how best to spend that money. For some, money burns a hole in their pocket, and it can be very tempting to splash out on lots of ‘wants’ until it’s all gone but consider taking that cash and putting it into a stocks and shares ISA instead. Investing as little as £250 can quickly grow and appreciate into much bigger sums.
What is a stocks and shares ISA?
The government allows every person to open a single ISA (Individual Savings Account) which grants you tax-free savings up to a specified limit, currently £20,000. There are a variety of different ISA accounts available, but you may only hold one single ISA at a time. There’s two ‘main’ types of ISA, one for cash, which functions much the same as a bank account, and one for stocks and shares.
Why invest in stocks and shares?
Investing in stocks and shares as opposed to a regular cash ISA has several benefits and drawbacks. ISAs are intended to be a savings account, so they are not meant to be like a regular bank account, but withdrawals are much easier from a cash ISA if you ever need to. They don’t generate much interest either, but since they’re tax-free, they’re still beneficial compared to a regular bank account.
Stocks and shares instead invests the money you put in into the stock market, buying shares in companies with the money you put in. This makes it harder to withdraw money from your ISA should you need it, but the benefit is that you should also earn much more money than with a cash ISA, as the value of your investments should outpace accrued interest.
How much do I need to invest?
Investing in stocks and shares is traditionally thought of as something for rich professionals, but anyone can get started. £250 a month doesn’t sound like much, but invested month-after-month, it soon starts to add up to significant quantities. There is a saying that the best time to invest was yesterday and the second-best time is today. Time in the market is much more important than timing the market, so don’t hesitate to begin no matter how small you start.
How do I open an account?
You can choose to invest yourself, but for many people that’s a daunting prospect. Luckily, providers like Money Farm take care of the hard work for you and make it easy to open a stocks and shares ISA. Fully-managed portfolios mean expert investors choose the best picks to invest your money in and move your money around as best they see fit. You don’t need to worry about managing your investments and can treat it like a savings account, putting money in every month and watching your pot grow.
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