You may well be familiar with the concept of deferred gratification: you deny yourself something now in order to enjoy something even better in the future. Often this is something that we apply to food (‘I won’t have that chocolate bar now because then I’ll be able to have a massive cake later instead’), but it’s a concept that also frequently relates to money, too.
In short, adopting a little bit of frugality now could be just what you need in order to be able to enjoy more money in the future. This is something with which we’re all familiar. After all, many of us save into pensions, forgoing part of our incomes now in exchange for a more comfortable retirement. But pensions aren’t the only form of investment that can benefit from a bit of frugality now. An investment ISA is another excellent example of how savvy savers can get the most out of their cash and, with any luck, stand to gain in the future.
The investment ISA is one of the most popular forms of investment in the country. Since they were first introduced in the UK back in 1999, they have grown hugely in popularity, especially among younger people. One of the reasons for this is that they can make a good first step into the world of investments as well as coming with a range of other benefits. For example, any dividends you earn on the best stocks and shares ISA are tax-free, unlike with other forms of stocks and shares investment.
This type of ISA is also generally very easy to access and there are different products available on the market, which you can choose according to how often you are likely to want to access your money. The ISA allowance, which refers to how much you are allowed to save in your investment ISA each tax year, is also growing, which means there is increasing scope to save. For instance, in the 2011 tax year, the ISA allowance was £10680. In the current 2012 tax year, the allowance is £11280.
One thing to note with a share ISA is that because it is a form of investment, there is a risk attached to it as investments can go either up or down depending on the state of the market. This is where the frugality aspect of the product comes in; investment ISAs are generally recommended as a long term savings product so you can get as much benefit – and as much growth – out of them as possible, while taking into account the fluctuations of the market. So, if you are happy to save your money over a period of at least 5 years), this can be a very good option.
There are different types of investment ISA that have different levels of risk attached to them, so you can choose one to suit your requirements. Higher risk ISAs can also attract significantly higher returns, so this is something you’ll need to weigh up before you make your choice – with any luck, your frugal mind set now will reward you financially in the years to come.