How to invest money (£445,000 by age 55)

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This is a guest post by fellow blogger Jennifer Kempson from www.mamafurfur.com, teaching you how to invest money from the age of 18! If the most successful people in the world invest, there might just be something in it, right?

Jennifer, a 30-something Scottish Working Mum recently released her first book “The Master Money Blueprint: How to Master your Money and Create a Powerful Money Mindset”, which you can purchase on Amazon for Amazon Kindle or paperback. Jennifer is also currently voted UK Money Vlogger 2018 and finalist for the UK Blog Awards “Finance Blog of the Year 2019”.

My passion is helping others create financial and time freedom in their own life, and I believe it can be achieved on any budget just by following a few simple principles such as learning how to invest money. The freedom to know that you have more than enough money to design life on your terms and do everything you want to do can truly change your world forever.

What is investing?

Often when I say I invest in the stock market, as a normal working mother from Glasgow, I get the same few responses: It is “too scary”, or “you could lose it all“, or “it’s too complicated and only for wealthy people to understand”. I promise you that after reading this blog post you’ll be one step closer to trusting the process of investing and know how to invest money – it’s easier than you think!

Essentially when you set up a savings or trading account with an investment company (such as Vanguard) or a pension through an investment company, you deposit your money so that is then used to purchase individual stocks, funds, bonds or hold the cash for you.

The type of investment you purchase with your deposited money will ultimately then return back further profit (interest) or make a decrease based on the asset you choose to buy with your money. You can purchase stocks within a range of companies, individual companies or bonds and for that trust with our money they return us back a portion of their profits.  


With any investment, this is not a short-term quick money scheme and we are not guaranteed to see return right away from investing our money. It is not similar to a normal bank account as the money is effectively used to buy a part of a company or loan for the length of time you choose to leave it.  

You need to invest your money for the long-term in whatever method you choose and ideally allow 5+ years for the natural dips and increases to smooth out your growth over time. We need to detach ourselves as much as possible from any current trend reports and trust that the markets will continue to increase overall as they have for 100+ years as an average.

The power of compound interest and how to invest money for your future

One principle that I love to teach others is the power of compound interest and your money, allowing it to work for you, rather than you having to work for money. We can use the power of compound interest whenever we store our money in investments or savings accounts allowing it to continue to multiple even when you are sleeping. Absolutely everyone can and should use the stock market and investments to grow their wealth long-term to help achieve their financial goals. In fact, when you have a savings account with the bank or even a pension you are using the stock market for returns – just the bank doesn’t share that with you.

Hands down, any budget and anyone can achieve and work towards financial freedom (living off the interest of your investment for life) or even retiring early with some simple money strategies.

Here’s some motivation for you…if you were to start from the age of 18 and save just £100 a month consistently until your 55th birthday into an Investment ISA (so £1200 total a year out of your £20k maximum), you would have almost £445k in savings to retire at age 55 if we used a modest rate of return of 10%.

Cash – why it is NOT an investment

By default, we believe that having cash in a normal savings account might be seen as the safest option, but it is not the best use of your money. On average you might receive 0.02-0.05% return each year on your money, which will not keep up with the cost of living increase of around 2% inflation each year. That effectively means your money is losing buying power each year that you leave it there untouched.“

Personally, outside of having emergency fund money of roughly 3-6 months of living expenses in an easy access account, we need to look at using our money to make more money to really define our financial security independent of anyone else.

How do we maximise our profits from investing?

Modern Portfolio Theory is the practice of spreading the risk and reward of any investment, and spreading investment over a range of companies to limit any potential losses and called Diversification.

Ideally we want to buy our stocks low and sell when they are high; and the whole stock market globally will go up when we balance this efficiency balance of our choices. That means making sure we don’t “have all our eggs in one basket” and analyse our choices regularly, or allow someone else to do it for you using a mutual fund.


Ideally we would want only 5% of our total investments in individual companies, if you wish to choose that route, and 1% in cash. This would allow our portfolios to remain balanced using the overall market for our growth rather than one company and the risk nature of that.

As simple as opening a bank account

Personally, I think there is no easier or simpler way to invest than through an Investment ISA (Individual Savings Account) in the UK which allows up to £20k per person to be saved tax free. It is a special form of savings account offered by many banks and investment companies that allows you to purchase stocks and shares with your money, and use the power of compound interest to see it grow dramatically. For example, if you were to invest in an Investment ISA from age 18 to 30 years consistently £200 a month, seeing a 4% average year on year growth, you could see roughly £38k in your savings at the end of those 12 years!

I am a huge fan of holding an Investment ISA account in your name and contributing to it regularly as well as any pension through your workplace. The benefit of an ISA is that your savings and interest received is tax free up to £20k but also you have access to it at any time, as long as you sell your shares and are able to wait the few days for that to happen. Your pension however is locked down until the age of 55 years minimum and no way to gain access outside of this until the time.

Using an Investment ISA, once you are confident with the terms and the funds or stocks you wish to buy based on your risk threshold and tolerance, you can even use this type of high interest return to provide a passive income in future years where the investment will return back to you enough money every year to live off indefinitely. That truly is when financial and time freedom comes into your own hands, particularly when we will be unsure whether such benefits as state pensions will be an option to support our living expenses when our time comes.