The 20% ISA challenge: can you increase your ISA contributions by 20% each month?

Everyone loves a good challenge, whether that’s running a certain distance or being able to lift heavy weights after a few months in the gym.

Why not extend that mantra to money where your efforts pay off handsomely, making you healthy and wealthy? Your challenge is to increase your ISA contributions by 20% each month.

Source: AJ Bell

Kick things off with a £50 contribution, on par with going out for a meal and a few drinks with friends. The second month’s contribution is 20% higher at £60 – you’re not having to sacrifice too much extra to meet that goal and it has already taken your ISA balance into three-digit territory.

Keep increasing the monthly contribution by 20% each time and in month six you’ll put just over £124 into your ISA. By this point you should feel in the swing of things. Just like someone who has put in hard work at the gym, the positive results are clearly visible and you’ll be in the groove of saving. You’ll almost have £500 in your ISA which is a fantastic achievement.

The next six months of the 20% challenge are going to be harder. By month 12 you’ll need to find approximately £374 to hit the target. That’s going to take some serious budgeting which means you’ll need careful preparation and a good handle on your personal finances to get the challenge over the finish line. Don’t worry as there is a neat trick to help you get the winners’ medal.

Time your challenge to begin in April. If you started in January, the biggest amount of money required would fall in December which is exactly the point at which you’re thinking about buying Christmas presents. Pushing it back four months means you avoid that pressure point.

There’s another compelling reason to start in April. It would mean the two biggest months of the challenge would fall in February and March, precisely the time when many people don’t have water or council tax bills to pay.

Certain utility bills have 10 monthly payments and then two months when you don’t pay anything – typically falling in February and March as they are the end of the tax year. Take advantage of not having to make payments in those months and use the savings to support your 20% ISA challenge.

It's good to have goals in life and have a few challenges along the way. Just as having a picture of sandy beach and blue seas on your fridge is incentive enough to make you save up for a dream holiday, running a savings challenge among your friendship group should give you the encouragement to put money away for something good down the line.

Putting away a set amount of money each month is rewarding, yet it’s always good to challenge yourself and do more.

Someone going to the gym and lifting the same weights each time for a year might be doing themselves a disservice. Not increasing weights over time means your muscles will eventually adapt to the current resistance level, meaning they won’t see gains in muscular strength or size. With money, remember that inflation eats away at your spending power, so £50 saved today might not buy you as much a year later.

Someone who simply saved £50 every month into an ISA for a year would have £600 after 12 months, excluding any interest or investment gains/charges. That’s great, but not a patch on the £1,979 you’d have from the 20% ISA challenge starting at £50 in the first month.