Want to get rich? Perhaps even make a million and retire early? It’s a dream that most of us have, and yet one that very few of us give ourselves a chance of realistically achieving. If you’re one of those people who simply lock their monthly savings up in something like a Cash ISA, I have bad news for you — you’ll likely be working right up until your mid-60s. Maybe even longer.
Forget about joining the millionaires club. Interest rates are so low on cash accounts that the prospect of making any sort of decent return is dead in the water. Ultra-low Bank of England base rates means that the yield on Cash ISAs is quite pathetic. And rates are in danger of falling further given the high chance of more rate cuts during the 2020s to support the UK economy.
Don’t despair, though. It’s pretty straightforward for the average Joe to make changes to their savings strategy with a view to getting rich and possibly even making that million. It means casting aside that Cash ISA and investing the bulk of your money in great UK shares via a Stocks and Shares ISA instead.
Let me crunch some numbers to show you what you could be missing out on by sticking with a Cash ISA. Consider someone aged 30 who saves £300 a month, every month, up until the age of 65. Based on the best-paying rate of 0.9% today, that person would have made £148k.
It’s not too bad a figure at face value. But dig a little deeper and the pitfalls of the Cash ISA become apparent. For the £126,000 that the saver squirreled away over three-and-a-half decades they’d have made a paltry profit of just £21,939. In my book that seems to be a small return for half a lifetime of financial sacrifices and hard work.
Make a million with UK shares
This is where the beauty of investing in UK shares comes in. Studies show us that the average long-term investor can expect to make a return of between 8% and 10% per year. Based on these figures, that person who invested £300 each month from the age of 30 to 65 would make a total return of between £643,000 and £1.02m. Yes, they really could have realised their goal to make a million.
Investing in a Stocks and Shares ISA improves your chances of becoming a millionaire with UK shares. These particular products save you having to pay anything to the taxman. And with a maximum annual investment allowance of £20k, these ISAs meet the needs of the vast majority of people.
We here at The Motley Fool believe that share investing is the best way to make your money work for you. The recent stock market crash provides a way to turbocharge the returns on your hard-earned savings too, by allowing you to buy UK shares at low prices and then watching them rise in value as the economic recovery takes hold. And there’s a wealth of top quality stocks out there to help you make a fortune.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.