Yes, saving £1,000 a month is great! It amounts to £12,000 a year and if this amount is invested properly, it will grow into a very large portfolio over time.
Let’s dive in further and see what it means to save such a large amount of money in the UK.
How Quickly Will £1,000 a Month Grow?
If invested properly, the monthly savings of £1000 a month can grow in to a very big portfolio in relatively short period of time. If you’re interested in checking how much that adds up to over the years, try out the savings calculator below.
Savings Growth Calculator UK
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There are 4 inputs to this saving £1000 a month calculator for the UK:
- Starting Investment: Enter the current value of your portfolio. If you’re just starting out, then you can default it to £0.
- Monthly Savings: The amount you will commit to your portfolio each month.
- Annual Rate of Return: A safe value to use is somewhere between 6% to 8%. If you are extremely conservative, then you can use 4% to 5%. If you are aggressive, you can try between 8-10%.
- Number of Years: How many years you can contribute the £1,000 per month.
The calculator shows two charts in the result. The first chart shows your portfolio growth over time when you save £1000 (or another amount) a month.
The second shows the same thing, but splits out the components in to your cumulative invested capital (dark blue) and market returns (orange). If you invest for long enough (over 30 years), the market returns will far exceed the total cash you have contributed.
How long will it take me to save £1 million when saving £1k a month?
If you invest £1,000 per month in the financial markets, your portfolio can grow to £1 million in just over 26 years if you earn an average 8% per year. If your portfolio generates 6% per year, you can expect to get there in a slightly longer 31 years.
It’s not as bad as it might seem. Let’s say you’re in your early 30s when you start saving £1k per month, you will likely be a millionaire by the time you’re 60. It’s a great position to be in!
If you’d like to try out other savings options to see if you can get there faster, do check out the millionaire calculator to see how quickly you can grow your savings!
How Much Should I Save Each Month?
It’s great that you’re able to commit to saving £1000 each month. However if you haven’t already done so, it’s worth stepping back for a second and asking a few more basic questions: how much should I save each month?
The first step to answer this question is understanding your personal financial goals. Are you saving for a house? Retirement? Emergency fund? Your child’s education? Or maybe all of these?
The amount you should save every month largely depends on these goals. For example, if you’re saving to buy a house, the required amount may be different compared to saving for retirement.
Your income also plays a crucial role in determining the appropriateness of saving £1,000 per month. For someone earning £60k a year, saving £1k means setting aside 20% of their monthly income. That is a lot of money!
Last, but not least, expenses play a significant role in determining how much to save each month. Expenses include the obvious like rent, food, but also things like mandatory debt payments on credit cards.
Higher expenses mean you have less money to save. Therefore, it’s important to assess your monthly expenses and work on reducing unnecessary spending.
All of this can be too tough to calculate mentally, so we’ve got a helpful retirement calculator which you can use to plan out in greater detail what your eventual retirement looks like. I recommend giving it a try!
Why should I save £1000 per month?
Beyond the obvious, having an emergency savings fund is a good idea. Unfortunately, life has a habit of being fairly random in nature, meaning if you need medical care or to take time off work suddenly, it’s worth having a savings pot to fall back on.
You should also start saving for taking time away from work, too. What if you want to take your family on vacation? Having a few thousand pounds in a savings account can ensure you’ll get away somewhere without having to keep counting the pennies.
Do also remember that costs are rising all over the world. Inflation is increasing in many territories, which is why it’s a good idea to have a stock of money to one side so you can overcome spending challenges.
Above all, it’s comforting to know that you have a savings account and money spare to handle much of what life throws at you. Sadly, many of modern life’s challenges need money before you can even start thinking about solving them!
What’s the best way to invest £1000 per month?
The best way to build up a huge portfolio with a £1000 a month in savings is arguably through investing. However before we get there, it’s first important to look at the full picture.
- Eliminate debt: As boring and repetitive as it sounds, it makes sense to first eliminate your debt – especially high interest rate debt such as credit card debt or other consumer loans like car loans or those buy-now-pay-later type debt.
- Build Up Your Emergency Fund: Again, another piece of unsexy advice, but it’s important to build up your emergency fund with cash savings that has at least 3 months, but preferably 6 months of expenses. You can invest your emergency fund in a high interest savings account or perhaps even put it in a money market fund.
- Invest it: Finally we get to the most fun piece. It’s important to invest your money in a way that aligns with your needs and risk tolerances. Depending on your needs you may choose to go with balanced funds or perhaps go all out with 100% equity funds. It’s important to manage your portfolio prudently, but being overly conservative is not recommended as you will end up sacrificing long-term returns.
If you need help with this, a good way to start would be to educate yourself and to meet with a financial advisor who has fiduciary duty towards you. They will help you decide how to structure your portfolio. Some people have a preference for capital growth whereas others may want dividend income.
Before You Go…
By investing in stocks, bonds, or real estate, individuals can generate passive income and secure their financial future. Compound interest can turn small investments into significant wealth over time, making it an essential tool for those looking to grow their net worth.
Our whole blog is dedicated to help you get on the path of financial freedom. Feel free to browse around and read through the articles. There are plenty of investment books and podcasts that you can use as a learning resource along the way to help you reach your goal faster.