A beginner’s guide to investing for young people

Recent years have seen elevated inflation in the UK, which peaked above 10% in late 2022. While CPI has since fallen back to around 2.8% (April 2026), inflation still erodes the real value of cash savings over time. Investing can help you outpace inflation, preserving and growing the purchasing power of your money.

Starting early can significantly boost your wealth thanks to compound interest. For example, investing £100 a month from the age of 20 could grow to around £83,000 by the age of 50, assuming a 5% annual return. If you start at the age of 30, the same investment would only grow to around £41,000 by the age of 50.

Please remember: the value of investments can fall as well as rise and you may get back less than you invest. Past performance is not a guide to future returns.

Investing helps you achieve long-term goals like buying a home, starting a business, or saving for retirement. It's more effective than relying solely on savings.

Here’s a breakdown of the main investment products available in the UK:

Individual Savings Accounts (ISAs)

A tax-efficient account allowing up to £20,000 per year into investments like shares, funds, and bonds or cash. No tax on profits or dividends. Start with as little as £25–£100 per month. The £20,000 annual allowance is confirmed until at least April 2031.

It is worth noting that from April 2027, the government is reducing the cash ISA allowance to £12,000 per year for investors who have not yet reached age 65 (or who will not turn 65 during that tax year), while the overall ISA allowance and stocks and shares ISA allowance remain at £20,000. This change is designed to encourage more people to invest rather than simply save in cash, further strengthening the case for getting started with investment ISAs early.

Lifetime ISA (LISA)

Designed for saving for a first home or retirement. You must open your account and make your first payment before the age of 40, and you can then contribute up to £4,000 per year until you turn 50. The government adds a 25% bonus on your contributions, worth up to £1,000 per year.

The LISA can be used to buy a first home worth up to £450,000 or accessed penalty-free from age 60 for retirement. Withdrawals for any other purpose carry a 25% charge on the total amount in the account, including the government bonus. This means you could get back less than you originally paid in.

The Lifetime ISA remains open to new savers for now, and existing account holders can continue contributing under the current rules. However, the government has consulted on replacing the LISA with a new, simpler First Time Buyer ISA. Until that product is introduced, the LISA remains available, but anyone considering opening one should be aware that its long-term future is under review. Speaking to a financial advisor is recommended before committing.

Investment Platforms and Apps

Apps like Moneybox, Plum, and Freetrade are beginner-friendly, allowing small, regular investments with minimal effort. Features like round-ups (investing spare change) make it easy to start.

Workplace Pensions and Private Pensions

Auto-enrolment means most people are contributing to a workplace pension. Many employers match your contributions up to a set level, effectively boosting your pensions for every pound you put in. Check your pension statements regularly and consider increasing contributions if you can.

• Start small, start now: You don’t need large sums to begin investing. Platforms allow contributions from as little as £1–£25 per month. Starting early helps overcome risk through time in the market.
• Focus on diversification: Spread investments across different asset classes like shares, bonds, and funds. Index funds and ETFs are beginner-friendly options that track entire markets, providing instant diversification with low fees.
• Understand risk and reward: Investments can fluctuate, but historically, markets trend upwards over the long term. Younger investors can generally afford to take on more risk because they have more time to recover from downturns.
• Avoid high fees: Small charges can erode long-term returns. Choose platforms with low fees. As a guide, look for fees below 0.5% annually.
• Build a financial safety net first: Ensure you have an emergency fund covering three to six months’ worth of living expenses, held an easy access savings account before investing.

One common mistake is chasing ‘get rich quick’ schemes. These often involve unregulated investments, such as investment scams promoted via social media, unsolicited stock tips, or fraudulent crypto schemes which can be highly risky and lead to significant financial losses. Instead, focus on more stable, regulated investment options.

Another mistake is not doing enough research before investing. Always check that any platform you use is FCA-authorised by searching the FCA Register at register.fca.org.uk. If you are unsure where to start, speaking to a financial advisor can help you understand your options with confidence. This knowledge will help you make informed decisions and avoid potential pitfalls.

Finally, panic-selling during market drops is a mistake that can undermine your long-term investment strategy. Market volatility is normal, and it's important to stay invested for the long term rather than reacting impulsively to short-term market fluctuations. Staying invested through short-term volatility is, historically, far more effective than trying to time the market.

Investing as a young person is one of the best decisions you can make for your financial future. By starting early, using beginner-friendly tools and avoiding common pitfalls, you can set yourself up for financial success.

At Crowe Financial Planning, we can help you:

• understand the basics of investing and assess your attitude to risk
• choose the right products, from ISAs to pensions, tailored to your financial goals
• build a sustainable, long-term investment strategy to grow wealth with confidence.

The value of investments can fall as well as rise. You may not get back what you invest. Tax treatment depends on individual circumstances and may be subject to change.