How to invest £40 a month?

Maddy25

Hi

I would like to invest £40 a month, for the next 5 years.

I'm not sure about investments and stuff, but I know that one of my family members invested in a 10 year "thing" and this year she got approximately £20,000! And she said that the monthly amount was fairly small, that she didn't even realise it was leaving her account!

I want something which;
- is risk-free,
- at least keeps up with the rate of inflation,
- does not allow early withdrawals,
- trustworthy and worry-free company.

So in 5 years, I will hopefully have a lump sum which I could use to buy a nice car or something! I'm rubbish at savings so, it has to be strict to not allow me to withdraw money early.

If anyone can please guide me to the right direction?

Thanks.

Maddy25

And maybe also a longer investment for 10 years at £20ish a month.

ColdIron

Maddy25 wrote: »

I want something which;
- is risk-free,
- at least keeps up with the rate of inflation

Such a thing doesn't exist I'm afraid, if it did everyone would get one

Maddy25

ColdIron wrote: »

Such a thing doesn't exist I'm afraid, if it did everyone would get one

So what is the best way to invest?

JohnRo

I'd suggest the first thing to do is lower your expectations, £40 a month won't buy you a nice car in 5 years without taking on some serious risk and being extremely lucky.

Maddy25

JohnRo wrote: »

I'd suggest the first thing to do is lower your expectations, £40 a month won't buy you a nice car in 5 years without taking on some serious risk and being extremely lucky.

£40 a month, for 5 years, is £2400. Knowing me I won't have single penny to upgrade my car unless I tie myself to an investment.

Maddy25

The main thing is, I need a investment which I cannot back out of or I'll just spend the money on the latest iPhone or something!

ColdIron

With your timescale and objectives investing isn't really suitable, what you want is a bank account. Savings accounts pay poor rates of interest right now so have a look at a current account like the TSB Plus one below, there are others like it. You'll need to transfer £500 in and out a month but it's easy to do. At 5% on balances up to £2,000 it'll pay you 5% but even then, as JohnRo says, you won't be able to buy a car with it

http://www.tsb.co.uk/current_accounts/classic_and_classic_plus_accounts.asp

Maddy25

ColdIron wrote: »

With your timescale and objectives investing isn't really suitable, what you want is a bank account. Savings accounts pay poor rates of interest right now so have a look at a current account like the TSB Plus one below, there are others like it. You'll need to transfer £500 in and out a month but it's easy to do. At 5% on balances up to £2,000 it'll pay you 5% but even then, as JohnRo says, you won't be able to buy a car with it

http://www.tsb.co.uk/current_accounts/classic_and_classic_plus_accounts.asp

What about something more long-term 10-15 years? Something that after I sign up I don't have to do anything, money will automatically leave my account.

About £50 a month.

Smithy101

Maddy25 I think you would be wise to educate yourself a little about investing my dear.
In particular I'm talking about risk.
You use the term risk free. The reason that there is no such thing is inflation. In short, it eats up the value of your investments.
If you can afford to save for 5 years you should consider saving in investments that are exposed to the stock market.
the reason for this is over time stock markets always go up. They always have.
Over the short term they go up and down but the direction of travel is much like an escalator in that it's always up, but it's unlike an escalator it's never straight up.
Have you heard about an investment trust savings plan? I would go for that.
I saw someone else post on this forum that Scottish investment Trust has increased its dividend every year for the past 29 years in a row and by an average of 7% per year - that's well ahead of inflation.
Does that fit with your risk profile?

I can't post links because I just registered and I'm not allowed to do so but theie is a post on Moneysavingexpert about it that links to the which investment trust.com website or just Google it.

ColdIron

Almost all fixed term (1 to 5 years) bank accounts don't allow additional deposits, lump sum only and prepare for even lower interest rates

You are going to have to compromise your requirements I'm afraid