How to make your family millionaires in just 10 years 

Analysis from AJ Bell shows a family of four could have built a tax-free investment portfolio worth £1 million in just 10 years by consistently maximising their ISA and Junior ISA allowances.  

If a family of four had used their ISA allowances in full over the past decade, and invested the money in a global tracker fund, they would be sitting on £1 million by now.  

For families starting today, by using the £20,000 adult ISA allowance and £9,000 Junior ISA allowance each year, and assuming 5% annual growth after charges, they could have more than £1m in their collective pot after 13 years.

Even families investing lower sums could still reach seven figures over time. For example, investing £12,000 per adult and £5,000 per child each year (a total of £34,000) could generate £1 million in around 18 years at a 5% annual growth rate.

Turning a dream into reality

Becoming millionaires might sound like a pipe dream for many families, but when you break the numbers down it becomes more achievable.

With the tax year end fast approaching, many people are thinking about how to make the most of their ISA allowances, but it’s easy to forget that children have valuable allowances too.

The Junior ISA limit is surprisingly generous and, when invested, can become a powerful way to build long-term family wealth.

By consistently using ISA and Junior ISA allowances and investing for the long term, families can let compounding do much of the heavy lifting. The earlier you start and the more consistent you are, the greater the impact.  

Stronger investment returns can dramatically shorten the journey to millionaire status. If a family achieved growth of 7% a year after charges, they could reach the milestone in just over 11 years, with their combined pot sitting at around £980,000 before a final top-up takes them over the £1 million mark.  

Of course, not every family can afford to invest the full £58,000 each year. The good news is that hitting the million-pound target doesn’t have to rely on maxing out allowances, it may simply take longer.

For instance, investing £12,000 a year into each adult’s ISA and £5,000 into each child’s ISA, the equivalent of around £1,400 a month per adult, could build a pot of around £1,004,000 over 18 years, assuming 5% annual growth after charges. That would see parents reaching millionaire status just as their children reach adulthood.  

How investing would have reached £1 million

We looked at a family of four, who used up two adult ISA allowances and two Junior ISA allowances each year. Starting in 2016/17 if they then invested that money in a global tracker fund, the Fidelity Index World, they would have hit the £1 million mark after 10 years.  

The ISA allowance is currently £20,000 for an adult and £9,000 a year for a Junior ISA, but the allowances haven’t always been so generous.

When the family started saving, they would have been putting away £38,640 a year – £15,240 for each adult ISA and £4,080 for each child. Those allowances gradually rose before hitting the current combined £58,000 in 2020-21 tax year.

By maximising the allowances each year, the family would have hit £1,083,174 by the end of February this year – overshooting the £1 million mark.

Hitting £1 million in the future  

Families starting to save today might think it will take ages to hit the £1 million mark, but they could get there sooner than they think.  

While we can’t know exactly what investment markets (or ISA allowances) will be in future we looked at using the full £20,000 adult ISA allowance and £9,000 Junior ISA allowance each year, and assuming those allowances remain unchanged. 

Assuming 5% annual growth after charges, a family of four would have more than £1m in their ISAs by the end of the 13th year investing. The big caveat is that it requires them to have £58,000 available to invest each year, which won’t be possible in most cases.

Two parents each investing £20,000 annually could see their combined ISA wealth grow to £744,000 over 13 years at a 5% growth rate. Meanwhile, two children both using their £9,000 ISA allowance could have £167,000 each. It takes the combined family ISA portfolio to £1,079,000.

Although families investing lower sums could still reach seven figures over time – it would just take longer to do so. For example, investing £12,000 per adult and £5,000 per child each year (a total of £34,000) could generate £1 million in around 18 years, assuming the same 5% a year investment growth.

Higher returns would mean reaching the goal sooner. In the scenario where the family is maximising their ISA allowances and paying in £58,000 a year, if annual returns averaged 7% instead of 5%, the £1 million milestone could be reached in just over 11 years. Equally, for a family wanting to reach the £1m goal in 18 years, if we assume 7% a year investment returns, they will need to pay in £27,500 a year across the accounts – around £2,300 a month.