Some would say that students understand money better than almost anyone. After all, a well-known feature of student life is the fact that you’re probably going to have to scrimp and save and get the most out of every penny. Despite this, lots of students are still really interested in investments and keen to save while they’re studying in order to fund their futures. Whether this involves saving for a once in a lifetime trip or for a house deposit varies, but all saving is definitely worthwhile and investments are one way of doing that.
One of the most popular types of student investments is the stocks and shares ISA. One reason lots of students like this is that you don’t need to understand the stock market yourself, as the shares ISA is managed on your behalf. It’s worth noting that there is a risk involved with investments as your money can go down as well as up, depending on how well the stock market does. However, if you are investing with an eye to the future and plan to keep your money in your share ISA for five years or more, there’s every chance your account will perform well.
Another reason stocks and shares ISAs are popular with students is that they allow you to save according to your ability to do so. For instance, some people choose to deposit a set amount of money into their account each month, whilst others deposit money as and when they are able to. When you consider the sometimes unpredictable nature of the student lifestyle, this definitely makes sense.
One thing that students need to be aware of is that there are savings limits in place on ISAs – if you have a cash ISA, the yearly limit is currently £5340 and for an investment ISA, it is £10680. This limit tends to go up each year, though, so if you are looking to save more it’s worth keeping an eye on the current limit. Another reason students like share ISAs is that you can split your savings if you want to – this means saving half as cash (which is guaranteed) and half as stocks and shares (the performance of which is pegged to the stock market).
There is also the ability for students to make ethical investment choices by shopping around for the best stocks and shares ISA. For instance, one option is the climate change ISA. This is an ISA that invests in companies that are more environmentally-friendly than the average, which can be an attractive choice for some. For students looking to minimise the risk of their investment, there are bond and gilt ISAs available. These are ISAs that invest in government gilts and corporate bonds, which means that while there is still a risk attached, they are less risky than ISAs pegged to the stock market and have the potential for better returns than cash ISAs.
Overall, it’s important for any student interested in a stocks and shares ISA to research the different options available to make sure they’re able to manage the risk while still making the most of their savings.