Use your ISA wisely to benefit your savings

More and more Scots are being braver in the way they try to save their money.

Statistics were released last week by HMRC, showing the Number of individuals subscribing to an Individual Savings Account (ISA).

The results show 1.638million Scots now have an ISA, with 22,148,000 in the UK as a whole.

Among the Scottish ISAs, 685,000 are cash ISAs, 162,000 are stocks and shares ISAs, and 54,000 were stocks and shares and cash ISAs.

Douglas Cameron, a financial planner at Brewin Dolphin in Glasgow, said: ‘It looks like we’re getting bolder in the way we save. You need cash for the short term but once you’ve got some rainy-day money, long-term cash should be invested, especially given a decade of low savings rates and the erosion of inflation.

‘Even putting as little as £50 a month into a stocks and shares ISA can go a long way for savers who’ve set financial goals. You don’t need to be wealthy to invest.

‘An initial investment of £500, with £50 invested each month into a stocks and shares ISA could grow to £8,231.93 over 10 years. This compares with just £6,693.07 in a cash ISA.

‘If someone is in the position to be able to take advantage of the full £20,000 ISA allowance and invest in a Stocks and Shares ISA each tax year, then they could be an ISA millionaire by 2042.’

Tom Jemmett, fund analyst at Brewin Dolphin, said: ‘You also don’t need to be an expert to invest. Picking stocks yourself can be high risk.

‘There is merit in considering a fund approach, in which the decision on individual stocks or bonds are made by a fund manager, or passively follow an index, and whereby holdings are spread across a range of investments.

‘For those who favour a more cautious approach, the likes of Threadneedle UK Equity Income and Trojan Income may be a good place to start. Alternatively, for those willing to take on a bit more risk, Old Mutual UK Smaller Companies and Aberforth Smaller Companies are options worth considering.’