Almost everybody dreams of becoming a millionaire at some point. Sadly, most of us will never achieve it.
But there is one way that almost everybody can make a million, provided they are patient.
You don’t have to be a brilliant entrepreneur, lottery jackpot winner, lucky inheritor or buy-to-let baron. You can use something that is open to every UK resident: your tax-efficient individual savings account (ISA) allowance.
Get Rich Slowly
New research from Fidelity Personal Investing shows that if you invest your full ISA allowance every year, that million should ultimately be yours.
It won’t happen overnight, however, but will take on average 27 years and 10 months, Fidelity calculates.
Only novices think you can make a fast buck from the stock market. What it really does is build your wealth slowly, year after year, until eventually you’re talking serious money.
The Nisa Way To Make A Million
Becoming an ISA millionaire is easier following Chancellor George Osborne’s move to increase the allowance to £15,000 a year from last July, in what was dubbed the New ISA, or ‘Nisa’.
This will rise in value every year, so in the next tax year you can invest up to £15,240 and shield your income and capital gains from the taxman.
Every UK adult has their own annual ISA allowance, which is issued on a “use it or lose it” basis, so don’t let yours go to waste.
Time is running out to use this year’s allowance, which expires at midnight 5 April.
Cashing Out
Now, of course, most people can’t afford to save £15,000 every year (and yes, I’m one of them).
But even small amounts can grow into large sums, provided you leave it to grow in the stock market.
You can split your £15,000 allowance between a cash ISA and stocks and shares ISA, in whatever proportion you like.
But with the average cash ISA paying just 1.05%, there is almost zero chance of becoming a cash ISA millionaire.
Fidelity calculates that if you had invested £15,000 in the average savings account 10 years ago, it would have grown to just £16,346 today.
But if you had invested that in the FTSE All Share Index instead, you would have £31,543, more than doubling your money.
The earlier you start investing, the better. Although stocks are more risky in the short run, they should deliver a positive return over five, 10 or 20 years.
Even if you don’t make that million, you should still end up richer than if you never tried at all.