How to turn just £10 a month into £32,000 savings pot – anyone can do it and it takes minutes to start

SAVING up for a goal like buying a house or even just for a rainy day can often feel like an impossible task.

But there’s a simple way to turn just £10 a month into thousands of pounds - and the sooner you get started, the better.

Squirrelling just a tiny bit of cash into a stocks and shares ISA each month can boost your savings by tens of thousands of pounds long-term, analysis by Seven Investment Management (7IM) for The Sun shows.

Stocks and shares ISAs allow you to put your money in the stock market tax-free, which should help your savings to increase in value over time.

This is because money that is invested in the stock market tends to grow faster than saving your money elsewhere, history has shown.

Investing can therefore help you to save for chunkier long-term goals like retirement, home renovations or a deposit on your first house faster than saving into a regular savings account.

And putting it into a stocks and shares Isa means that any growth in your investments is tax-free, as ISAs are exempt from tax.

Stocks and shares ISAs are different to cash ISAs, where you money is kept in cash and you earn tax-free interest on your pot.

7IM has revealed that putting just £10 a month in a stocks and shares ISA which achieves typical 8% growth every year would give you £32,000 after 40 years.

Of this nest egg, you would have paid in only £4,800 yourself, while the remaining £27,200 would be from growth on your investments.

This means you'd have got more than five times the amount you paid into the account back as free cash.

If you were able to double your monthly investment to £20 and still achieved the same 8% growth, then you would have an enormous £65,000 after 40 years.

Around £9,600 of this pot would have come from your own pocket, while £55,400 would be due to the growth in your investment.

Meanwhile, scraping together £50 to pay into the account each month would give you a whopping £163,000 after 40 years, of which just £24,000 would have come from your own pocket.

These are all sizeable pots for you to spend in later life - but you don't have to wait that long to get a decent lump sum together.

7IM's analysis shows that a £10 a month investment would give you almost £2,000 after 10 years, more than £5,700 after 20 years, or £14,277 after 30 years.

The earlier you can start investing, the quicker you will have this pot.

For example, if you began investing £10 a month for your child when they're young, you could have grown them a house deposit by early adulthood.

Can I still benefit if I start saving now?

However, you can still enjoy huge returns even if you start investing later in life.

But you will achieve better results faster if you can put a bit more cash away.

For example, if you put £50 a month into a stocks and shares ISA for 20 years, you would still be left with a sizeable £29,000 pot.

This is more than double the £12,000 you would have needed to pay into the account.

So, if you began investing at 40, you'd still have saved a huge chunk of money for retirement.

Meanwhile, saving £50 a month for a decade would leave you with £9,000 - around £3,000 more than you would have paid into the account.

Ben Kumar, head of equity strategy at 7IM, said: “When it comes to saving money, I always tell people that even a little makes a big difference. Even tiny amounts can be invested.

“Getting into good habits early can help even more.”

What if I increase my contributions each year?

Nudging up the amount you save each year can also significantly increase the value of your savings pot.

For example, if you increased the amount you put away each month by £1 every year, then after 40 years you would be handed £67,000.

Of this, just £14,000 would be made up of your own savings, while a whopping £53,000 would come from the growth in your investment.

But if you are able to up your investment by £5 a year then your return would more than double.

This would mean saving £10 a month in the first year, £15 a month in year two, £20 a month in year three, all the way up to £210 a month in 40 years.

Although you would have paid in a hefty £50,000 during this time, your investment would be worth a staggering £200,000.

Always do your research before you start to invest and never put your money into a product you do not understand.

And remember you can lose money when investing, so make sure you have enough money to cover any urgent expenses before starting.