‘I’m a finance expert - here are five tips to supercharge your savings today'

As a raft of fresh tax allowances has now come into effect, regular saving can offer a more “affordable” method for Britons looking to build up an investment pot, an expert has said.

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said: “The new tax year is now underway, which means a new set of tax allowances to utilise.

“These allowances give anyone that wants to invest tax-efficiently for the future a concrete target to save towards this tax year.”

These include a new £20,000 Individual Savings Account (ISA) allowance and a £9,000 Junior ISA allowance.

There’s also a fresh gross annual allowance for workers of up to £60,000 to contribute towards a pension or 100 percent of their salary, whichever is lower, and a gross annual allowance of £3,600 for non-earning pension savers.

However, most will not have a spare £20,000 to invest into an ISA or a lump sum to contribute towards a pension, Ms Haine noted.

She said: “Others may be reticent to invest a large sum of cash in one go in case the markets suddenly take a dive. This is where regular saving comes into play.

“Saving regularly, most commonly on a monthly basis, is not only more affordable as investors can choose to direct a fixed sum from their monthly income into their ISA, a pension such as a Self-Invested Personal Pension (SIPP) or trading account, but it is also an effective way to manage any short-term turbulence in the financial markets.”

Bestinvest analysis of its regular savers found adult account holders aged between 51 to 60 make up the largest share among its adult monthly savers, followed by those aged between 41 to 50.

The investment platform’s largest cohort of regular savers overall, however, are children aged between zero and 18 – highlighting the potential value parents and grandparents put into building a pot of money to shore up their children’s financial futures.

Other data insights from Bestinvest highlight which accounts our adult regular savers target the most. The majority (42 percent) set up monthly direct debits to fund an ISA.

Saving into a SIPP is the second preferred product among its regular savers with 28 percent choosing that option. Meanwhile, 20 percent save directly into a JISA and 10 percent into a General Investment Account.

With that in mind, Ms Haine outlines how regular saving works and why it can pay off for investors.

Hassle-free investing

While regular saving into an investment account might sound daunting to a first-timer, it is simply the practice of paying a regular sum into an ISA, personal pension, or a general investment account monthly rather than committing to a lump sum in one go.

Ms Haine said: “The investor simply chooses the amount they want to invest, and the appropriate investments to invest in, aligned to their attitude to risk and their financial goals – something that many people are already doing with their workplace pension.

“While this can be done manually, remembering to purchase assets every four weeks can easily be forgotten, which is why setting up a Direct Debit to automatically collect a set sum each month from a bank or building society account ensures people don’t miss out.

“Again, the process is the same as someone moving cash monthly from a regular bank or building society current account into a separate savings account.”

Affordable sums can be invested without denting budgets

According to Ms Haine, savers should only invest an amount they are happy to set aside each month and won’t need to dip into for other expenses for at least five years.

Ms Haine said: “The investor simply chooses the amount they want to invest, and the appropriate investments to invest in, aligned to their attitude to risk and their financial goals – something that many people are already doing with their workplace pension.

“While this can be done manually, remembering to purchase assets every four weeks can easily be forgotten, which is why setting up a Direct Debit to automatically collect a set sum each month from a bank or building society account ensures people don’t miss out.

“Again, the process is the same as someone moving cash monthly from a regular bank or building society current account into a separate savings account.”

According to Ms Haine, savers should only invest an amount they are happy to set aside each month and won’t need to dip into for other expenses for at least five years.

She explained: “There’s no point investing £500 for a future life goal and then raiding those funds months later because an unexpected household bill has cropped up. Choose an amount to save that won’t be missed. Some providers have set a minimum on regular savings. At Bestinvest, this is set at £50.”

She added: “Some people mistakenly believe that you need to be wealthy to invest, but small, affordable amounts saved monthly still have the potential to deliver attractive returns over the long term. This is thanks to the beauty of compounding, where returns help to generate even more returns.”

Create a disciplined savings habit

Investing regularly rather than at ad hoc moments can help investors become more disciplined long-term savers.

Ms Haine said: “Committing to a fixed sum every month, an amount that won’t leave the household budget short and won’t get touched once it is in your investment account, is an effortless way to create a savings habit that can last a lifetime.”

Time in the markets can smooth out volatility

Investors should typically have a time horizon of at least five years, enough time to allow their money to ride out any ups and downs in the financial markets.

Ms Haine said: “Financial markets, especially equities, can be volatile over short-term time periods, but have historically delivered much higher real returns – that have a much better chance of beating the effects of inflation – than cash savings over the long term.”

It can help key savings goals become more achievable

Ms Haine said: “Saving little and often can turn small amounts into large sums that can be used to fund major lifestyle goals.

“A £300 monthly saving over 10 years equates to a total contribution of £36,000 and a total ISA value of £45,553 – money that can be used to fund a home renovation, a sabbatical or retirement.

“Leave the funds untouched and continue that regular savings journey for another 10 years and the ISA pot will grow to £117,505.”

These calculations are based on a five percent medium-risk growth using Bestinvest’s ISA calculator.

Ms Haine added: “Don’t forget your children or grandchildren either, as a child has a Junior ISA allowance of up to £9,000. A family investing £750 a month – which equates to £9,000 a year - in a JISA for 18 years, would see a total investment of £162,000 grow to £250,926 over that period based on a five percent annual growth rate assumption.

“This is a sizeable sum that can be used to fund university costs or help a child buy their first home.”