How to reach your money goals, wherever you’re starting

Investing can feel daunting at the outset. When I first dove in, I thought the best place to start was learning to read company reports. About 30 minutes and two YouTube videos later, I was more confused than when I began.

This was not the best way to start my investment journey, but I had gotten one bit right: I didn’t have a ton of leftover cash at the end of the month, but I decided it was worth starting anyways.

You don’t need to be swimming in cash to start investing, and in fact, it’s quite hard for most of us to be swimming in cash without investing first. But those little bits really do add up, not to mention the benefit of building the habit. Just make sure you have some emergency savings that aren’t invested in case you need it.

For many people, the most comfortable way to start investing is to put a little bit of your salary into your investment account each month. This can help you build a foundation without feeling overwhelmed.

That might be £50 for some, and £500 for others. If you put £50 in an investment that returned an average of 7% each year after fees, your pot would be worth approximately £3,600 in just five years. Even better, approximately £600 of that amount would simply be from your investment returns, creating extra money in your pocket.

At £500 a month, that sum becomes £35,797 after five years with the same investment returns.

Determining your goals

Most of us are much better at keeping a habit if we have a goal in mind, and this goal can be unique to you. You don’t have to save for a home just because everyone else seems to be. Make sure it’s something that motivates you.

For example, you might want to become a certified yoga instructor. You can find a retreat that looks appealing to you and calculate how much it would cost you to complete, accounting for travel and lodging. Then you can determine how much money you’d need to invest, and how aggressively you’d like to invest it, to get there.

You can use AJ Bell’s Stocks and shares ISA calculator to come up with your figures. Of course, you can’t predict returns, so these figures will be an estimate, and make sure you consider any fees.

How do I get started?

For many, the first step to investing is opening the account, and even here you’ll be faced with some options. Besides pensions, one of the most popular accounts for investing is a Stocks and shares ISA. These accounts protect your gains from capital gains tax when it comes time to sell, and there is no income tax on any dividends paid by your investments. You can contribute up to £20,000 in your Stocks and shares ISA each year.

Some investors who aren't aware of the ISA benefits will open a Dealing account instead of an ISA. Dealing accounts do still allow you to invest, but you will not get the same tax protections, and you might have to file with HMRC depending on your investment dividends and gains.

You can set up automatic payments into your ISA so you aren’t tempted to use the money for something else throughout the month.

What should I invest in?

A lot of first-time investors choose to start investing with a global equity fund, which holds a range of companies across the world. You can also look at multi-asset funds, where investment professionals choose a mix of different assets based on how much risk you’re comfortable taking.

Check out our guide to the main types of investments for a deeper dive.

What kind of fees should I expect?

First, you will typically have a transaction charge to buy and sell investments. Second, you have a platform charge which you pay to your provider for holding your investments.

If you invest in a fund, you will also pay a management fee that’s built into the product but you don’t tend to see this taken from your money directly. Choosing a fund with a low ongoing charge can mean more money in your pocket. These charges are often a fraction of a percent of what you invest, but it still helps to be mindful, so they don’t eat too much into your gains, and future goals.