The balance nobody talks about
Some days you might think you have to ‘save everything.’ Other days you might taking the ‘live your best life now’ approach. In reality, the sweet spot sits in the middle. There’s no point saving every penny if it means missing out on experiences that make life fun, but lean too far the other way and you’ll leave your future self short.
The goal is to enjoy life today and set yourself up for tomorrow. It’s a lifelong balancing act, so it’s worth learning early.
How to take your first steps into investing
Start with securing what you’ve got
First things first, if you’re carry any short-term debt, like a credit card balance or overdraft, it’s important to pay that off before you start investing. Next, it’s sensible to build an emergency fund: money put aside for life’s unexpected moments – a broken boiler or sudden change in income.
Aim to save three to six months of essential spending. This is for your needs, not wants. If that feels daunting, start small. Setting aside a little each month soon adds up, and you’ll be grateful for every pound saved if life throws you a curveball. Knowing you’ve got something to fall back on can also help you feel more confident about taking the next step.
Saving gets you started, investing is how you move forward
Investing isn’t just for people who already have money – it’s how people build wealth in the first place.
Cash might feel safe but, over the long-term, inflation quietly eats away at its value meaning your money buys you less in the future. Investing provides an opportunity to outpace inflation and grow your money.
You’ll have heard the expression ‘Rome wasn’t built in a day,’ and the same can be said for investing. Think long-term: what might you need to pay for in the next 10, 15, 20 years? A home, financial freedom, or a retirement seeing the world? Investing is for money that you can afford to leave untouched for at least five years.
The power of starting small
You don’t need a lot to get started. Setting aside a little each month may not feel life changing, but over time it builds momentum – and your confidence.
Most of us subscribe to the gym or streaming services every month, but what about subscribing to your future? Regularly investing in a Stocks and Shares ISA is the one subscription that can pay you back. Set it, automate it, and let consistency do the work. Investing using an ISA shields any gains and income from the taxman, meaning you keep every penny you earn. If you invest elsewhere you might have to pay dividend tax and capital gains tax.
Funds are a good entry point. An investment fund is essentially a pot of money pooled together from lots of investors, which is then spread across a mix of investments on your behalf. This is a good entry point because it automatically helps to smooth out market ups and downs — rather than putting all your eggs in one basket. If you’ve been auto‑enrolled into a workplace pension, chances are you’re already investing this way.
Many providers offer ready-made investment solutions. You simply choose one that matches your attitude to risk. Generally, the more a fund invests in shares, the higher the risk – but also the greater the potential for long‑term returns. Either way, you benefit from leaving individual investment decisions to the experts.
Power up your pension
Put simply, pensions help you keep more of what you earn while saving for future you (at retirement age). Thanks to tax relief, some of the money you would have handed over to HMRC goes into your pension instead. On top of that, an employer will usually contribute towards your pension too. It’s worth paying in as much as you can afford and maximising any contribution on offer from your employer – it’s effectively free money that you wouldn’t otherwise get.
Giving your pension attention now means you can harness the magic of compound growth where you earn returns on previous returns. The earlier you start, the longer your money has to grow, and the greater the potential.
When you’re auto-enrolled into a pension, your monthly contributions are invested into a default fund, which is a one-size-fits-all approach, but you do have the option to switch to a fund that better aligns with your goals. If you’re investing for decades rather than years, you may feel comfortable taking on a little more risk in hope of higher returns, knowing you have a long time to ride out any market bumps along the way.
Summary
Investing can feel daunting, but following these steps is a great place to start. There are simple actions you can take right now to build your financial confidence — and the habits you build today will help you later.
Remember, you don’t need to be wealthy or have everything figured out to start investing. You just need to start. When you’re in your twenties or early thirties, time is your greatest asset. Small, consistent steps today can make a significant difference to your financial future.
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