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As you change throughout life, so should your investments (Credit: Getty Images) As we grow and change throughout our lives, so should our investments. The way you invest money in your 20s is likely to be different from your 30s, 40s, and beyond. So what are the guiding principles behind growing your money wisely? Here’s everything you need to know, broken down by age. When you are younger, you can afford to take more money risks (Picture: Getty Images) In your 20s Recent research from Shepherds Friendly shows that those in their20s are the most likely age group to invest, with more than two-thirds having money in stocks and shares or other vehicles. They can afford to take some risks, knowing that, historically, stocks and shares have outperformed other ways of boosting their nest eggs. This is a time to start learning about the stock market, look to the future, and make the most of tax-efficient wrappers to help your savings grow. Use a good value platform that allows you to buy directly into stocks and shares as well as funds that diversify your investments easily. Apps such as AJ Bell Dodl or Trading 212 are designed with younger people in mind. Dodl has a popular Lifetime Isa and pays cash interest while you decide how to invest it, while Trading 212 allows you to use automated ‘pies’ to spread your risk. Here are some tips for investing in your 20s. Use tax-efficient vehicle To keep the taxman at bay, always put as much as possible into your tax-free annual allowances first. These include your pension, which you can’t touch until you are older, but also Isas. Currently you can put £20,000 a year into an Isa and all gains and dividends are off limits to HMRC. If you don’t own a home yet, you should get a Lifetime Isa (Lisa). You can put up to £4,000 a year into one as part of your £20,000 Isa allowance and the government will top it up by 25 per cent – that’s up to £1,000 free money. This can only be used to buy a first home valued at under £450,000, or for retirement and there are penalties if you take it out for something else. Before you’re a home-owner, set up a Lifetime Isa (Credit: Getty Images) Never opt out of pension contributions Auto-enrolment into pensions starts at the age of 22 – meaning you are automatically put into an employer’s scheme. A pension is an investment that comes with valuable tax breaks and free money from your employer, who has to contribute, too. Your future self will thank you. Educate yourself It’s easy to get sucked in by influencers rather than taking proper advice. Some reputable sources of information include the free Rebel Finance School, an online course run by a couple who have won a British Empire Medal for their education work. There’s also MoneySavingExpert Martin Lewis’s A Beginner’s Guide To Investing podcast on BBC Sounds. Learn about investing by listening to the experts (Credit: Getty Images) In your 30s Your 30s can be an expensive decade. Although your salary is likely to be higher than it was in your 20s, your expenses are, too. The average first-time buyer is between 32 and 34, so you may have mortgage payments to contend with. If you have children, there will be even less money spare. However, now is a good time to squirrel something away for you – even if you can only carve out a small amount. Map reveals the average age of first-time buyers across England The South East has experienced a near three-year jump in average buyer age since 2021, reaching 34, the highest in the country. In comparison, the East Midlands has bucked the trend slightly, seeing a small decline to around 31 years, while northern regions like the North West saw the average age rise from roughly 30 to 32. See the map that shows the average age of first-time buyers in England here Here are some tips for investing when you’re in your 30s. Turbo-charge your pension Your pension has plenty of time to grow, so if you can up your contributions now, you’ll have less of a scramble later. Check whether your company has a salary-sacrifice scheme. This allows employees to exchange part of their salary in return for an employer contribution. This means you don’t have to pay national insurance on it, so you can put more into your pot without it costing you. ‘If your employer offers matching contributions, be sure to increase your own where possible,’ says Robert Cochran, retirement expert at Scottish Widows. Having children can make saving more difficult (Picture: Getty Images) Jump-start a Junior ISA Investing even the smallest amounts into a Junior Isa every month could help parents get their kids through university in a financially resilient fashion A Junior Isa (Jisa) offers the same tax benefits as a regular one but the money belongs to the child once they are 18. According to the Investment Association, if you had put £9,000 into a Junior Cash Isa 18 years ago, with the hope your children would use it to fund a university degree or buy a first home, it would be worth £7,453 in real terms today. Had the same amount been invested in a typical global equity fund via a Junior Stocks and Shares Isa, however, it would be worth nearly £21,000. Adults can put up to £9,000 a year into a Jisa, so it’s a good place to park cash gifts from grandparents, too. In your 40s You reach your peak earning years in your 40s and that means, in theory, you’ll have the most money to invest. In your 40s, you will likely be in the peak time of your earnings (Picture: Getty Images) Although you’re closer to retirement, you can still place your money in more volatile stocks and shares in your pension, rather than moving it to more sedate types of investment, so long as you know you won’t need it soon. The average age to receive an inheritance is 47, so you may also have unexpected windfalls coming your way that could be tucked away. These are some tips for investing in your 40s. Invest to close the pension gap Mike Ambery, retirement savings director at pensions group Standard Life, warns that many people in their 40s will end up in a ‘pension gap’. They are unlikely to have a defined benefit pension based on a final salary, which have declined recently and may also not have been auto-enrolled into a pension. But it’s likely you’ll be at the top end of your earning potential, so you’re still in good time to increase your pension contributions. In some cases, the efficient way to do this will be to open a Self Invested Personal Pension (SIPP) to supplement your workplace one, although if an employer will match your contributions up to a certain level, you should do it. Get advice if needed By the time you are in your 40s, investing may have got more complex. If you haven’t made a will, you should. Writing a will in your 40s is important (Picture: Getty Images) To find someone who can help you with a will try STEP (step.org) or the Society of Will Writers (willwriters.com). To find a qualified independent financial adviser try unbiased.co.uk or vouchedfor.co.uk. In your 50s and beyond You might be thinking about using your money to fund retirement in the near future at this point. While it isn’t too late to invest, you might want to hold some of it in lower risk assets, such as bonds, in case of volatility before you need it. It is important to remain financially clued-up in retirement (Picture: Getty Images) You might also be thinking about Inheritance Tax (IHT) and how it might affect family members, so it may be a time to consider giving your money to help your children, instead of investing it. From April 2027, assets still invested in your pension become part of your estate for IHT purposes, which will see many more families paying the 40 per cent tax. Top tips for investing in your 50s: Have a Pension Wise appointment Once you are 50, you are eligible for a free appointment with the government’s Pension Wise service, as long as you have a pension pot. This could help you to decide what to do with your money and could give you insight into any other investments. Seven minutes of admin can help you gain £9,000 you’re entitled to Seven minutes of admin is all it takes to start the process of tracking down your lost pension pot, which is usually worth £9,500 on average. Lost pensions are those that’ve been forgotten about or pensions that people were aware of but did not know how to locate, making it difficult to claim at retirement. So, where do you go to find the details to locate your pension? Read more about the study and how to track down your lost pension here Consider tax implications If you’re likely to start taking a pension as well as spending Isas when you retire, there are implications with the HMRC. You can take a 25 per cent lump sum from your pension without the taxman getting any of it, while withdrawals from your Isa are tax free, but you’ll want to manage your spending to minimise what you pay on everything else. Seek advice Mistakes have less time to correct themselves, so if you want to feel confident, do see an independent financial adviser for one-off help. Do you have a story to share? Get in touch by emailing MetroLifestyleTeam@Metro.co.uk.
