Many people have big goals, like climbing the real estate ladder or investing money for retirement — and they can be difficult to achieve. However, one expert has pointed to a formula that could help Brits find those targets more easily attainable.
Express.co.uk spoke to Rob Gardner, Investment Director at St James’ Place Wealth Management, who provided further insight.
He pointed to the Lifetime ISA as a key way for Britons to get up the property ladder or to help their children or grandchildren if prices continue to rise.
The account allows Brits aged 18-40 to buy their first home or save for later life by depositing up to £4,000 each year up to the age of 50.
The government adds a 25 per cent bonus to their savings, up to a maximum of £1,000 a year.
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He urged people to think about their daily vices, whether it’s coffee, a Netflix subscription, doing nails, or anything else.
Then people should calculate the yearly price of that vice by taking what they spend per day and multiplying it over the year.
By setting this aside for a decade, individuals can easily multiply the number to see how much they could set aside.
But the expert emphasized that multiplying this number by 1.25, and later by 1.5, is perhaps the most important.
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However, this part of the equation can only be achieved if a person takes further action.
Mr Gardner explained: “The number you have is the amount of money you could keep over ten years and add up to buy a house.
“I asked you to multiply your savings by 1.25 per cent over ten years because the Government wants you to save and gives you 25p for every pound in your LISA.
“So if you save £1,000 you get a free top-up of £250. And who doesn’t love free money?
“I then asked you to multiply that number by 1.5 – the amount of compound growth you can get on your money if you invest and grow your savings over ten years by investing in LISA stocks and shares .”
Mr. Gardner assumed an average growth rate of seven percent over 10 years through a diversified investment portfolio.
He added that individuals should be able to double their money every ten years, and regular money saved over that period grows about 1.5 times on average.
He continued: “The cost of a coffee a day or a monthly nail polish or weekly after-work drinks could help you make that down payment you need on a house — just.
“There’s absolutely no reason anyone on an average salary can’t save enough money for bail in ten years. You just have to trade one of today’s vices for future prosperity.
“So if you are thinking about saving for a house then understand that the coffee you buy every morning on your way to work is not only costing you £2.50 but almost £4.70 against yours future home deposit.
“That way, you can better decide what’s important to you.”