How compounding could double your money over 25 years

As we celebrate Global Money Week, interactive investor (ii), the second-largest investment platform for private investors, is dedicated to helping all investors, including newer ones, feel empowered in their investment journey.

interactive investor's latest research* – as part of its Tax Year Zen campaign – revealed that more than half of adults (51%) feel stressed when thinking about investing for their future.

interactive investor’s goal is to make the process simple, accessible, and empowering – no matter where you are in your financial journey.

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On top of this, only around one quarter (28%) of UK adults were aware of the upcoming tax year end deadline, despite its importance.

Whether you’re aiming to build long-term financial resilience, plan for a home purchase, fund your child’s education, or save for retirement, starting - or building on - your investment journey today can put you closer to reaching those goals. 

Below, interactive investor’s Camilla Esmund, Senior Manager, outlines some tips for newer or less confident investors.

The below is for educational purposes only and should not be considered financial advice.

Investing made simple

Camilla Esmund explains: “Our research consistently shows that investing can be really intimidating, and many don’t know where to start. However, the key to success is to simply begin, regardless of how much you can afford to tuck away. In fact, even small or modest contributions can make a big difference over time.

“The earlier you start investing, the better, as long-term growth benefits from the power of compounding. This is where you reinvest any interest to your accrued sum, earning interest on this too, which creates a snowball effect over time.”

The table below illustrates how compound interest can double your total investment over 25 years

Assumes 5% growth a year, net of fees. Source: interactive investor.

Esmund says: “As the end of the tax year is approaching, it’s worth remember that investing this money in a tax wrapper, such as an ISA, means you'll get to keep all of your hard-earned wealth.

“But just because investment is a long game, it doesn’t mean it’s ever too late to start. What matters most is assessing where you are in life, your financial goals, and your tolerance for risk.

“For many, the prospect of investing can feel overwhelming, but even small, regular contributions can add up significantly over time. Regular investing allows you to drip-feed money into the stock market, helping to smooth out volatility while building a healthy investing habit. It’s about making steady progress without the pressure of large lump-sum investments. But every investor is different, do what is best for you and your stage of life.”

Keep an eye on fees

Esmund notes: “Even though we can’t control the market, you can control how much you pay to invest. Unfortunately, it is not always easy to clearly see the costs associated with your investments – not least the platform charge. But it is well-worth checking how much you are paying. 

“It can be disheartening to integrate good habits, stick to your investment strategy for the long term and see the fruits of compounding take effect over time, only for your growing pot to be eaten away in unnecessary fees. Over decades, the differences can add up to tens of thousands of pounds. Importantly, paying over the odds means less wealth for you to enjoy down the line.”

Don’t underestimate the power of a conversation

Esmund adds: “Confidence is a barrier to more people investing, but talking about investing can really help. The genius of this is in its simplicity. One conversation about money or investing could make all the difference. Sadly, discussing finances among friends and family is still quite taboo, especially – as research shows – among women, but having open conversations can ultimately help everyone feel less overwhelmed. You may even inspire someone else by sharing your experience with your investments.”

Investing vs. saving: the case for investing

Esmund continues: “While saving in cash accounts offers security, research shows investing is typically the better option for long-term growth. 

“And with Rachel Reeves announcing earlier this month that Cash ISAs would be left untouched in the upcoming Spring Statement, there is no time like the present to make the most of the tax-efficient allowances.

“For those who are comfortable with taking more risk, investing in the stock market has the potential to outpace inflation and deliver better returns than savings accounts over time. Also, if you're in it for the long haul, the value of your investments will normally have time to recover from any temporary market dips. Ultimately, diversifying your portfolio with investments in different sectors, markets and types of assets is one of the most effective ways to manage risk. 

“Here at interactive investor, we offer educational resources to help investors build diverse portfolios across various asset classes, sectors, and geographical locations.

“For those who prefer a more hands-off approach, ii’s Managed ISA provides expert management of portfolios, giving investors peace of mind without the need for prior investment experience.”

Tax year end: a chance to maximise your allowances

As we approach the end of the tax year on 5 April 2025, now is the perfect time to make the most of your tax-efficient allowances and reliefs.

interactive investor’s Tax Year Zen campaign offers a helpful checklist to ensure you’re on track for tax-efficient investing, whether that means topping up your ISA or making pension contributions.

A few simple actions can help you take full advantage of the tax breaks available to you, such as:

• Top up your ISA: To make use of the current tax year allowance, £20,000, make sure you’ve topped up your ISA and added cash before the tax year ends – even if you’ve not decided how to invest it. 
• Build a nest egg for your child: If you’ve got children, you can also open a Junior ISA and begin saving for when they turn 18. This can help with those big expenses they might face in early life – like university, or their first car. 
• Make pension contributions: Tax year end is a good time to reassess your pension and make any last-minute contributions. Unlike ISAs, you can roll over any unused allowance from the past three years and claim tax relief.
• Use your CGT allowance: This handy exemption allows you to realise £3,000 in tax-free gains every year. However, it resets on 6 April and if you don't use it, you lose it. So, if you have shares that aren't held in tax wrappers, consider using your CGT exemption before the tax year ends.
• Get dividend savvy: If you invest outside a SIPP or ISA, such as a Trading Account, your personal dividend allowance is £500. Before making any new investments in your Trading Account, consider making them in your ISA where you have an uncapped ISA dividend benefit.

Methodology 

*The research was conducted by Censuswide, among a sample of 2,000 Nationally representative UK respondents (Aged 18+). The data was collected between 15.01.2025 - 17.01.2025. Censuswide abides by and employs members of the Market Research Society and follows the MRS code of conduct and ESOMAR principles. Censuswide is also a member of the British Polling Council.