Cash ISA: half a million in 30 years?

gandalf

Am I doing the maths right?

If both my wife and I save £3.6k in our cash ISAs for the next 30 years and earn 5% interest on average, then we end up with more than half a million quid in today's money?

Holy Mother of God!

Why doesn't everyone do this then? It's such a no brainer!

Check this out...

Annual Rate 5.0

New Capital Added Every Year 7,200

Starting Full Year Total Compounded
Capital Return Invested ROE
7,200 7,560 7,200 5.00
14,760 15,498 14,400 7.63
22,698 23,833 21,600 10.34
31,033 32,585 28,800 13.14
39,785 41,774 36,000 16.04
48,974 51,422 43,200 19.03
58,622 61,554 50,400 22.13
68,754 72,191 57,600 25.33
79,391 83,361 64,800 28.64
90,561 95,089 72,000 32.07
102,289 107,403 79,200 35.61
114,603 120,333 86,400 39.27
127,533 133,910 93,600 43.07
141,110 148,166 100,800 46.99
155,366 163,134 108,000 51.05
170,334 178,851 115,200 55.25
186,051 195,353 122,400 59.60
202,553 212,681 129,600 64.11
219,881 230,875 136,800 68.77
238,075 249,979 144,000 73.60
257,179 270,038 151,200 78.60
277,238 291,099 158,400 83.77
298,299 313,214 165,600 89.14
320,414 336,435 172,800 94.70
343,635 360,817 180,000 100.45
368,017 386,418 187,200 106.42
393,618 413,299 194,400 112.60
420,499 441,524 201,600 119.01
448,724 471,160 208,800 125.65
478,360 502,278 216,000 132.54
509,478 534,952 223,200 139.67

Jonbvn

Sorry, but you have to account for inflation when you work out the value in today's money. Taking the RPI at 4.5% (likely to rise) your real interest rate is less than 1% AER. Doesn't look so fantastic now does it?

Lokolo

Because a lot of peole don't want to save £3600 a year.

I am planning on though

poppy10_2

£500,000 in 2038 is only £139k in today's money (assuming inflation over the next 30 years will be equivalent to inflation over the last 30 years.)

gandalf

Yes, but don't forget that with inflation the wages will go up as will the maximum allowance, so the effect will still be the same.

King_Weasel

"Am I doing the maths right?

If both my wife and I save £3.6k in our cash ISAs for the next 30 years and earn 5% interest on average, then we end up with more than half a million quid ..."

- yes, you're doing fine so far -

".... in today's money."

- ah, not quite. Unfortunately, it will be in tomorrow's money (that's 30 years' time). And as others have explained here, it does make a difference.

There's a helpful quote in "Hitchhikers Guide" somewhere where you only need 1p to become a millionaire, but sadly I can't find it. Can anyone help?

Aegis

King_Weasel wrote: »

"Am I doing the maths right?

If both my wife and I save £3.6k in our cash ISAs for the next 30 years and earn 5% interest on average, then we end up with more than half a million quid ..."

- yes, you're doing fine so far -

".... in today's money."

- ah, not quite. Unfortunately, it will be in tomorrow's money (that's 30 years' time). And as others have explained here, it does make a difference.

There's a helpful quote in "Hitchhikers Guide" somewhere where you only need 1p to become a millionaire, but sadly I can't find it. Can anyone help?

I think it's at the start of Restaurant at the End of the Universe when they're talking about the high cost of the food being offset by depositing a sum way back in the past and retrieving it just in time to pay for your meal.

gandalf

OK, so let me ask the question the other way round: if you are a net loser in 30 years time, why even bother to put money into a cash ISA?

Milarky

dunstonh must be offline temporarily - but he were here he would probably be explaining by now that 30 years is an awfully long time to 'invest' (but in your case also save to invest, which just makes it worse!) in a low risk/low return product - unless you have also used your S&S ISA allowance at the same time - in which case you will probably just get off with a warning!!

dzug

gandalf wrote: »

OK, so let me ask the question the other way round: if you are a net loser in 30 years time, why even bother to put money into a cash ISA?

coz you are an even bigger loser if you don't

beingjdc

Yeah, that's the thing. I've done my maths and based on my current savings rate, I would have just over a million pounds in savings and investments when I retire. However that will probably buy me a fry-up to celebrate, by that time!