Learn · Plain English, not financial advice
Paying your future first.
Four ideas that do most of the work: invest early and often, use the tax-free wrapper you’re given, pay yourself a fixed salary, and own the whole market cheaply instead of guessing at parts of it.
01 / Why invest at all
Cash keeps its number. Investments keep their value.
Money in a current account loses a little of what it can buy every year as prices rise. Invested in the companies that make up the economy, it has historically grown faster than prices over long periods, and the growth compounds: returns earn returns.
The catch is the word long. Markets fall, sometimes by a third or more, and can take years to recover. So invest money you won’t need for five years or more, and keep a reserve in cash for everything shorter.
£500 a month for 15 years
| Year | Paid in | Invested |
|---|---|---|
| 0 | £0 | £0 |
| 5 | £30,000 | £33,907 |
| 10 | £60,000 | £77,182 |
| 15 | £90,000 | £132,412 |
02 / Pay yourself a salary
Run your money like a business that employs you.
A business doesn’t let its owner dip into the till. It pays the bills, invests in its future, keeps a reserve, and pays the owner a set salary. Do the same: decide a fixed monthly amount for personal spending, and spend it freely, guilt and all.
Everything else has a job before the month starts. Running costs get paid, your investment goes out on payday (not from what’s left at the end), and any surplus tops up your reserve. That’s what “paying your future first” means.
One month’s £4,200, given a job
- Running costs£2,15051%
- Personal spending£80019%
- Capital deployed£75018%
- Loan repayment£2105%
- To the reserve£2907%
03 / Setting up an ISA
The tax-free wrapper every UK adult gets.
An Individual Savings Account isn’t an investment itself. It’s a wrapper you put investments in, and inside it there’s no tax on growth, dividends or interest, and nothing to report. You can put in up to £20,000 each tax year (6 April to 5 April), split across ISA types as you like.
Three kinds
Stocks and Shares ISA
For long-term investing. Holds funds and shares. The one this page is about.
Lifetime ISA
Age 18 to 39 to open. Up to £4,000 a year with a 25% government bonus, for a first home or from age 60. A charge applies if you withdraw for anything else.
Cash ISA
Tax-free interest on savings. Good for a reserve, not for growth.
Opening one, in five steps
- Keep your reserve firstA few months of running costs in cash, so a bad month never forces you to sell.
- Choose a providerAn investment platform. Compare the platform fee and the fund’s fee; together they’re what you pay each year.
- Open the ISA onlineYou’ll need your National Insurance number and bank details. It takes about ten minutes.
- Set a monthly direct debitOn payday, for the amount your plan sets aside.
- Pick the investmentFor most people, one global index fund (section 04). Then leave it alone.
Allowances and rules change, and depend on your circumstances. Check the current ones at gov.uk/individual-savings-accounts.
04 / Index funds, not stock picking
Own the haystack instead of looking for the needle.
An index fund buys every company in a market in proportion to its size: a global one holds thousands of companies across dozens of countries, for a fee of around 0.1% to 0.3% a year. You get the market’s return, minus very little.
Picking stocks, or paying a fund manager to, means betting you can beat that. Most professionals don’t: studies of actively managed funds find that over 15 years the large majority fall behind their index once fees are counted. Each year you’re not trying is a year you can’t get it wrong.
What a 1% fee costs
£500 a month for 25 years, the same 6% a year before fees.
At 0.2% a year
£328,500
At 1.2% a year
£284,700
£43,800 less, from one percentage point.
Low cost
Fees come out every year whether markets rise or fall. The cheapest fund you’re happy with is usually the best one.
Spread wide
A global fund means no single company, country or sector can sink you.
Automatic
Same amount, same day, every month. You buy more when prices are low without having to decide to.
Fund your future, month by month.
Erkos shows every month you invest as a funded month on your horizon, and never counts it as spending. Join the waitlist to hear when it launches.
Not financial advice. This page is general information to help you understand the ideas, not a recommendation to buy any product. The value of investments can go down as well as up, and you may get back less than you put in. Past performance doesn’t guarantee future returns. Tax treatment depends on your circumstances and may change. For free, impartial guidance, see MoneyHelper, or speak to a regulated financial adviser.