Many things change as we age, from our appearance to our style.
And just as our tastes in clothes shift through the decades, so should our investments.
The way you invest money in your 20s is likely to be different from your 30s, 40s and beyond.
So what are the guiding principles behind growing money wisely?
Here’s everything you need to know, broken down by age…
In your 20s
Recent research from Shepherds Friendly shows that those in their
20s are the most likely age group to invest, with more than two-thirds having money in stocks and shares or other vehicles.
They can afford to take some risks, knowing that, historically, stocks and shares have outperformed other ways of boosting your nest eggs.
This is a time to start to learn about the stock market, look to the future and make the most of tax-efficient wrappers to help your savings grow.
Use a good value platform that allows you to buy directly into stocks and shares as well as funds that diversify your investments easily. Apps such as AJ Bell Dodl or Trading 212 are designed with younger people in mind.
Dodl has a popular Lifetime Isa and pays cash interest while you decide how to invest it, while Trading 212 allows you to use automated ‘pies’ that allow you to spread your risk.
Top tips for investing in your 20s:
Use tax-efficient vehicle
To keep the taxman at bay, always put as much as possible into your tax-free annual allowances first. These include your pension, which you can’t touch until you are older, but also Isas.
Currently you can put £20,000 a year into an Isa and all gains and dividends are off limits to HMRC.
If you don’t own a home yet, you should get a Lifetime Isa (Lisa). You can put up to £4,000 a year into one as part of your £20,000 Isa allowance and the government will top it up by 25 per cent – that’s up to £1,000 free money.
This can only be used to buy a first home valued at under £450,000, or for retirement and there are penalties if you take it out for something else.
Never opt-out
Auto-enrolment into pensions starts at the age of 22 – meaning you are automatically put into an employer’s scheme.
A pension is an investment that comes with valuable tax breaks and free money from your employer, who has to contribute, too. Your future self will thank you.
Educate yourself
It’s easy to get sucked in by influencers rather than taking proper advice.
Some reputable sources of information include the free Rebel Finance School, an online course run by a couple who have won a British Empire Medal for their education work.
There’s also Moneysaving Expert’s Martin Lewis’s A Beginner’s Guide To Investing podcast on BBC Sounds.
In your 30s
This can be an expensive decade. Although your salary is likely to be higher than it was in your 20s, your expenses are, too.
The average first-time buyer is between 32 and 34, so you may have mortgage payments to contend with.
If you have children, there will be even less money spare. However, now is a good time to squirrel something away for you– even if you can only carve out a small amount.
Top tips for investing in your 30s:
Turbo-charge your pension
Your pension has plenty of time to grow, so if you can up your contributions now you’ll have less of a scramble later.
Check whether your company has a salary-sacrifice scheme. This allows employees to exchange part of their salary in return for an employer contribution.
This means you don’t have to pay national insurance on it, so you can put more into your pot without it costing you.
‘If your employer offers matching contributions, be sure to increase your own where possible,’ says Robert Cochran, retirement expert at Scottish Widows.
Jump-start a Junior ISA
Investing even the smallest amounts into a Junior Isa every month could help parents get their kids through university in a financially resilient fashion
A Junior Isa (Jisa) offers the same tax benefits as a regular one but the money belongs to the child once they are 18.
According to the Investment Association, if you had put £9,000 into a Junior Cash Isa 18 years ago, with the hope your children would use it to fund a university degree or buy a first home, it would be worth £7,453 in real terms today.
Had the same amount been invested in a typical global equity fund via a Junior Stocks and Shares Isa, however, it would be worth nearly £21,000.
Adults can put up to £9,000 a year into a Jisa, so it’s a good place to park cash gifts from grandparents, too.
In your 40s
You reach your peak earning years in your 40s and that means, in theory, you’ll have the most money to invest.
Although you’re closer to retirement, you can still place your money in more volatile stocks and shares in your pension, rather than moving it to more sedate types of investment, so long as you know you won’t need it soon.
The average age to receive an inheritance is 47, so you may also have unexpected windfalls coming your way that could be tucked away.
Top tips for investing in your 40s:
Invest to close the pension gap
Mike Ambery, retirement savings director at pensions group Standard Life, warns that many people in their 40s will end up in a ‘pension gap’.
They are unlikely to have a defined benefit pension based on a final salary, which have declined recently and may also not have been auto-enrolled into a pension.
But it’s likely you’ll be at the top end of your earning potential, so you’re still in good time to increase your pension contributions.
In some cases, the efficient way to do this will be to open a Self Invested Personal Pension (SIPP) to supplement your workplace one, although if an employer will match your contributions up to a certain level, you should do it.
Get advice if needed
By the time you are in your 40s, investing may have got more complex. If you haven’t made a will, you should.
To find someone who can help you with a will try STEP (step.org) or the Society of Will Writers (willwriters.com). To find a qualified independent financial adviser try unbiased.co.uk or vouchedfor.co.uk.
In your 50s and beyond
You might be thinking about using your money to fund retirement in the near future at this point.
While it isn’t too late to invest, you might want to hold some of it in lower risk assets, such as bonds, in case of volatility before you need it.
You might also be thinking about Inheritance Tax (IHT) and how it might affect family members, so it may be a time to consider giving your money to help your children, instead of investing it.
From April 2027, assets still invested in your pension become part of your estate for IHT purposes, which will see many more families paying the 40 per cent tax.
Top tips for investing in your 50s:
Have a Pension Wise appointment
Once you are 50, you are eligible for a free appointment with the government’s Pension Wise service, as long as you have a pension pot.
This could help you to decide what to do with your money and could give you insight into any other investments.
Consider tax implications
If you’re likely to start taking a pension as well as spending Isas when you retire, there are implications with the HMRC.
You can take a 25 per cent lump sum from your pension without the taxman getting any of it, while withdrawals from your Isa are tax free, but you’ll want to manage your spending to minimise what you pay on everything else.
Seek advice
Mistakes have less time to correct themselves, so if you want to feel confident, do see an independent financial adviser for one-off help.
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