An ISA account isn’t very glamorous, but it is reliable. In an era where people are trying out a lot of different alternatives to make a little more profit on their money, there is a growing movement that is desperate to get people to go back to the basics.
What is an ISA account? If you’re just looking into this, here’s the quick rundown that you need. Basically, this is a savings account that has tax benefits if you use it. It allows you to save money in a way that is advantageous to you tax wise. The money that you make on the ISA isn’t taxed, and the money that you put in is spared from taxes. Given that the government is basically giving you encouragement to save, you might as well do what you can right?
You can open an ISA account from age 16 and over, which gives you plenty of time to let your money grow. The Government is really serious about people doing more with the ISA, because it’s such a great way to build the future while still saving money on their taxes. Nationwide UK did some research and discovered that the Government receives an extra 500 million pounds in terms of tax revenue just because people don’t put enough into their ISA accounts. That’s definitely something that needs to change, and it has to change in a big way. It’s only going to start moving in a positive direction once people start seeing it as something that they need to do.
There is a limit that you need to respect, and it includes both parts of the allowance for the ISA. There’s a cash ISA side, and a stocks and shares ISA side. Both sides come up to 11,620 GBP for the current tax year. You should always check year to year, because the allowance changes and you want to make sure that you maximize the tax benefits.
If you want to maximize your ISA, some experts say that you should focus more on the stocks and shares (S&S) side than the cash ISA side. However, you should keep in mind that you can lose your money on the stocks and shares side. You’re not guaranteed to get an increase on your money. However, you can also get a lot more than you might expect, versus the cash ISA side. Either way, you don’t have to report your ISA savings to the Government for tax purposes, as long as you follow the rules.
There’s something very powerful about saving your money in this format. It’s not like you have to put all of your savings here, but it is something that you want to think about.
Let’s go a bit deeper than this. You may have heard about Lord John Lee, a life peer of the Liberal Democrat party, who became the UK’s first ISA millionaire. That’s not a mistype or anything of the sort — this gentlemen really became a millionaire through ISA investments. He pulled it off with a very conservative approach to finance that was very astounding. Instead of going for the flashiest companies, he simply reached for companies who were properly run, selling products that he could identify with.
So, the bottom line here is to not overlook something just because you think it can’t grow. The sooner you start, the more steps you’re taking for your future. If you have children, don’t forget that they are also watching you make better financial choices. As long as you remain consistent, you can set a good example for them. Don’t forget that you can also set them up with a junior ISA account before they turn 16, which will let them put aside money as well. The account will be automatically converted to a regular ISA account when they are of age.