When should you start investing? Your questions answered

For many of us, there’s the nagging suspicion that we should probably be thinking about investing. Whether it’s the small change from each purchase, a bumped-up salary or a milestone age – there are lots of prompts that seem to shout ‘invest!’ But when’s the right time?

Your highest financial priorities are making sure you cover your living expenses and responsibilities, along with actively paying down any debt with high interest rates or fees. Your focus should then be on feeding an emergency fund to cover you in a pinch. If you’re able to meet these two priorities, then the answer to the question ‘when to invest?’ could be ‘right now’ (if it meets your attitude to risk).

What’s the point of investing?

Before you start on the investing journey, it’s crucial you have a clear goal in mind. Even if you decide you make enough money, your savings are on point and you’re the right age to start, the big question that still needs to be answered is ‘why?’

What kind of goal do you want to invest towards? It could be a deposit for a home, your retirement or a once-in-a-lifetime holiday. Once you have something specific to point towards, it helps keep you focused and makes it easier to part with your cash on a regular basis. And over time, you will hopefully get closer and closer to realising those goals. Leaving your investment – without making withdrawals – gives your money the best chance of growing in the long term so that you stand a chance of gaining a greater return on your original investment.

Am I the right age?

Let’s get clear on the advantage of long-term investment. The longer your investment has to grow, the more time you have to potentially earn a return on your investment – which you can reinvest and add to your initial capital. In other words, your money has time to make more money – and you could add that extra cash to the pot. Get rich quick schemes and attempts to play the market are generally inadvisable – you need to be in it for the long haul.

So, what’s the right age? If you’re 18 years old, can afford to and are happy with the risk, you can get started with investing. Over time, your money could be worth more than cash left in a zero- or low-interest account, but remember it could also be worth less.

Do I need to invest a large lump sum?

No. Though investing may seem like the reserve of the rich, it’s just not so. For example, there are apps where you can invest your spare change; whenever you make a purchase, the change gets rounded up to the nearest pound, and those pennies get diverted into your investment portfolio. You’ll barely notice the money leaving your account, and the hands-off approach means you scarcely have to think about it. And this is just one of the many low buy-in options. In this case, you don’t need to start with much to make a lot.

If you have a little more a Nutmeg (Opens in new window) account might be ideal, because you can start with £100 for a Junior ISA or Lifetime ISA, and £500 for an ISA, general investment or pension, and you can easily monitor your investments via the app.

I’m not sure I make enough money

The good news is you don’t need thousands to get started with investing. Nor do you need to make huge monthly contributions to qualify. Once you’ve satisfied your fixed outgoings, you can think about splitting whatever’s left between spending, savings and investments. A common split suggested by some financial institutions and experts is the 50-30-20 ratio, where 50% of your net income (that's after you've paid tax, pension and National Insurance) goes to what you need (like rent and utilities), 30% to what you want (like nights out with friends), and 20% to savings and investments.

Of that 20%, once you have an emergency fund, and you’re happy with any other savings goals, you could invest the rest. This is just one great way to help establish good money habits – by putting away some pounds so you’re not tempted to spend.

Remember, when deciding how much to invest, you should pick an amount you can comfortably afford, and you should consider any money invested as being unavailable for the medium to long term. This is important since most investments could take five or more years to be fruitful – and all investments can go down as well as up at any time. It's also prudent to think about your retirement, whatever age you are, and whether you could be investing more into your pension.

Introducing Nutmeg

Introducing Nutmeg, the digital wealth manager that's part of the Chase family. You can now open an account with Nutmeg (Opens in new window) and keep an eye on your investments from the Chase app – so you can see everything in one place.

Nutmeg is authorised and regulated by the FCA in relation to certain investment services and restricted advice only. Chase is a trading name of J.P. Morgan Europe Limited. Nutmeg and J.P. Morgan Europe Limited are J.P. Morgan companies. Products provided by Nutmeg are not guaranteed by Chase. Before applying, you should consider if a Nutmeg account and its features are suitable for you and your investment needs.

Disclaimer: As with all investing, your capital is at risk. The value of your portfolio can go down as well as up and you may get back less than you invest. Tax treatment depends on your individual circumstances and may be subject to change in the future.

Recommended reading

• Save or invest?
• A guide to different types of investments
• What does it take to become an ISA millionaire?