Everyone dreams of becoming a millionaire, but most people truly believe it will remain a fantasy. However, new research from Fidelity Personal Investing has found that it could be possible - using the NISA - and in fewer years than ever.
Savers who are able to deposit the full NISA allowance – set to be £15,000 from July 1 – every year, could become millionaires in just 25 years' time, based on 5% growth. This is four years earlier than is currently possible with the allowance of £11,520.
And the best thing is, this means not only would you have £1 million stashed away, but it is also sheltered from the clutches of the taxman. However, you'd probably need to opt for stocks and shares ISAs to achieve the returns necessary, but with just three weeks to go till the new allowances come into play it could be time to start making your money work harder for you and achieve those goals.
After this year's Budget announcements, savers were rewarded with a new ISA allowance of £15,000, as well as being able to combine cash and stocks and shares savings, opening up options for everyone. This means that investors can move money between the two types of account freely, and this flexibility will probably make stocks and shares ISAs a more realistic choice for many, as wary investors can transfer their money back into cash easily.
If you are thinking of delving into stocks and shares in the hope of making your fortune, then you will want to maximise your allowance and diversify your portfolio. And it's also all about your attitude to risk. Stocks and shares ISAs are a lot riskier than their cash-based counterparts, and although the higher the risk the more you stand to gain, you might get back less than you put in. There are no guaranteed winners!
Maike Currie, of Fidelity Personal Investing, says:
"Investing in cash is your least risky option. However it is often said that no one ever became a millionaire by leaving their money in a cash account, and with interest rates at historic lows this is more true today than ever.
"While it is important to hold some cash as a 'rainy day' fund and some disposable cash to take advantage of new investment opportunities, the beauty of a stocks and shares ISA is that it allows you to invest in a wide range of investment vehicles such as bonds, equities and funds. The latter is a more risky option than a cash ISA as your money will be exposed to the vagaries of the stock market, [but] figures show that investing in equities would have earned you thousands more, compared to saving through cash over the past ten years. (Fidelity's calculations show that if a saver had invested £15,000 into the FTSE All Share index over a 10 year period they would now be left with £35,218.50. If, however, they had invested £15,000 into the average UK savings account over the same period, they would be left with £16,582.65. That's a difference of £18,635.85. For most savers, that will be too big a discrepancy to ignore."
Whether you can't resist the urge for larger returns, or perhaps you prefer to play it safer, there are many options available, including locking your money away in a fixed rate ISA to receive better rates. And, thanks to inflation falling, there are now many more opportunities to secure a meaningful return – check out our pick of the top 6 inflation beating cash ISAs to get started.
You may not be aiming as high as becoming a millionaire but instead you may be saving that all-important deposit for your first home, looking forward to your dream holiday or perhaps using it as an alternative pension product. Whatever your individual goals, the best way to get closer to them is to start saving as much as you can in whichever ISA suits your individual needs, and you'll soon be taking the first important step towards making your fortune.
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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