25 Years Old, Saving £150/month

TightMike · 20 August 2017 at 8:01PM

I'm 25 and since I was young I've been saving/investing, but more on a whim than regularly. For example if I had an extra £500 at the end of the month I'd invest half of it. But I want to start putting aside £150 a month while I'm at university, and after I graduate next year I'll increase it accordingly. I already have a Lifetime ISA and I'll be maxing that out before April. I have a Fidelity ISA right now which has a small amount in, but to keep it simple lets say it has £0 in it. I am getting charged (afaik) 0.35% + 0.05% Advisor Ongoing Fee.

According to this compound interest calculator site, if I put £150 a month away for 30 years with 7% interest and 2% inflation, I'll have £216,679.96 in 30 years. This number, £217k. Is that modified to take into account how much that money is worth now, or in 30 years? Because £217k sounds like a lot, but it will be worth a lot less in 30 years. So how much would £217k be worth in 30 years in todays money? Could someone help me wrap my head around it please?

Thank

Neil_Jones · 20 August 2017 at 10:26PM

The inflation rate on that site assumes you are increasing your monthly payments by 2%, it's not a measure of inflation such as CPI or RPI or anything like that.

So basically it implies you start off with £150 a month, or £1800 in the first year and then £1836 in the second year, or £153 a month. By year 30 your monthly donations become £266.41.

As you look at it now you'll be seeing it in today's worth. As an example, £1,000.00 in 2000 is equivalent to £1,429.59 in 2017 - In other words, £1,000.00 today can buy the same as £692.95 could in 2000. (Assuming a yearly inflation rate of 2% from 2013 onwards)

That's a change of nearly £300 in just 17 years. Assuming a similar trend and pattern, £1,000.00 in 2047 will buy the same as £377.99 could in 2000 at a constant 2% inflation.

25 Years Old, Saving £150/month

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