How much should you invest?
Here’s a quick guide with some tips and examples of how much of your money you should invest.
Investing 101
Investing is a great way to grow your money over time. But, you might not know how much you need to put in now to see good returns in the future. A simple rule is: don’t overstretch yourself.
Because of this, many investors stick with 10% – which means every month, they invest 10% of their paycheck. But, this isn’t set in stone – and you can do more or less depending on what’s affordable for you in your current situation.
The important thing to remember is that if you’re able to make regular contributions to your investments, it’s one of the best ways to grow your money over time. There are two easy ways to set up regular contributions to your investments – either with round ups, or with a weekly deposit.
Round ups
Round ups will do just that – round your everyday purchases to the nearest pound and invest the difference. So if you buy a coffee for £2.50, it’ll be rounded up to £3 and the 50p difference will be added to your investment account. Over time, you’ll be surprised by how your spare change adds up.
Round ups can be a great way to invest on a budget, because you don’t have to commit to a fixed amount of money every week. If you’re buying more things, you’ll have more purchases to round up. If you’re buying less, you’ll have fewer – so it really does match your spending patterns.
Weekly deposits
A weekly deposit gives you more control over how much money you regularly invest. That’s because a weekly deposit will take a fixed amount of money every week and invest it into your allocation.
This is where you can make a decision about what you can realistically afford to regularly invest. As mentioned before, some people choose to do 10% of their paycheck. So, if you make around £2,000 a month, 10% of that is £200. If you wanted to invest this with a weekly, you could set up a regular deposit for £50 a week.
Monthly boosts
Aside from round ups and weekly deposits, which are more regular, you can also set up a payday boost – which will invest a fixed amount of money at the end of every month, usually after payday. This way, you’ll get into the habit of setting aside a portion of your monthly budget for your investments.
Like with weekly deposits, if you make around £2,000 a month and you want to invest 10% of that, you’ll invest £200 each month – leaving you with a monthly budget of £1,800. But that £200 doesn’t just ‘vanish’ – it’s been put to work to grow into something bigger over the long term.
All investing should be long term (min. 5 years). The value of your investments can go up and down, and you may get back less than you invest.