Four financial goals and how to invest for each

From buying a home to funding retirement, you’re more likely to keep saving hard if you have a clear goal from the start.

Every penny you invest could put you one step closer to hitting that goal, and provides an ongoing incentive to stash away as much as possible.

Types of investment goals

There are plenty of reasons why people invest.

• Some want to build up a pot of money to fund a loft conversion or house extension.
• Others might want to fulfil their dream of having a breathtaking wedding.
• Those with children might want to invest money to help pay for their university fees.
• Or there’s the classic reason of simply wanting to build up wealth to travel far and wide during retirement.

Sometimes, investment goals aren’t only about treating yourself. You might want to invest to help others and save up money that can be passed to children or grandchildren. Alternatively, it can be sound planning to build up a rainy-day fund as you never know what emergencies come your way that cost money to fix.

Everyone has different goals, but they can all be made easier by starting to invest as early as possible.

You can get help along the way in the form of various government or employer schemes that either top up your investment account with free money or provide tax-related benefits.

Here are four different investment goals and how to navigate each wealth creation journey.

1. Your goal: Buying your first home

What type of account? Lifetime ISA

The beauty of the Lifetime ISA is that the government will give you free money for using the account.

You can invest up to £4,000 a year and the government tops it up by 25%. It’s a great way to accelerate your efforts towards having a big enough deposit to buy your first home. There’s a catch: the property must be worth £450,000 or less, otherwise you’ll be charged a 25% withdrawal penalty unless you’re aged 60 or over.

Timeline: How long do you have to invest?

Most people will buy their first home when they have enough money. There isn’t a specific deadline or ticking clock as they can continue renting in the interim period.

However, it’s frustrating to pay rent to your landlord and have nothing to show for it. That in itself should be incentive enough to squirrel away as much as you can for a deposit.

It’s possible to work out how long it might take to save up based on your existing savings, the amount that you can afford to invest each month, and the potential returns relative to the risks you’re happy to take.

How much do you need for your goal and how do you want to save towards it?

The average house price in the UK in August 2024 was £227,191, according to Rightmove. A 10% deposit would be £22,719.

You can put £4,000 into a Lifetime ISA every year and build up a pot worth £22,628 after four years, factoring in the government bonus and 5% investment return after charges.

Saving into a Lifetime ISA
Year	Contribution	Government bonus	Total including 5% investment return after charges
1	£4,000	£1,000	£5,250.00
2	£4,000	£1,000	£10,762.50
3	£4,000	£1,000	£16,550.63
4	£4,000	£1,000	£22,628.16

Source: AJ Bell

Having existing savings would mean you could buy the house sooner than in four years’ time.

You would need to think hard about where to put the money as three to four years is not a long time to deal with the fluctuations of the stock market. Be too aggressive with investment choices and you could be left with less money than you started with.

See our Lifetime ISA Open a Lifetime ISA

2. Your goal: Loft conversion

What type of account? Stocks and shares ISA

You can invest up to £20,0000 a year into a Stocks and shares ISA and money can be withdrawn at any time, without penalty. All the capital gains and any income from investments inside an ISA are tax-free.

Note that the £20,000 annual allowance covers all types of ISA, so you would need to factor in contributions to other ISAs if using them alongside a Stocks and shares ISA. For example, putting £5,000 into a Cash ISA would mean you could only put £15,000 into a Stocks and shares ISA in the same tax year.

Timeline: How long do you have to invest?

This depends on how urgently you need the additional room. Someone with a baby on the way might be able to put off building another bedroom for at least five years, but others with older children might find they are hard pressed to add extra space, and the alternative is moving house.

How much do you need for your goal and how do you want to save towards it?

A loft conversion can cost between £25,000 and £60,000 depending on style, size and location. They are a popular way to add another bedroom to a home or turn storage space into an additional lounge, games room or place to work.

While it’s quite a bit of money to spend upfront, they can add considerable value to a property which can make them a good investment.

A couple might be able to afford to invest £500 a month each into a Stocks and shares ISA. At 5% investment return after charges, that would total £12,600 after one year, £25,830 after two years and £39,721 after three years – potentially enough to get the work done.

Just remember that stock markets can go down as well as up. Someone with a short time horizon might therefore consider more cautious investment choices.

See our Stocks & shares ISA Open a Stocks & shares ISA

3. Your goal: Children’s or grandchildren’s university fees

What type of account? Junior ISA

Up to £9,000 can be paid into a Junior ISA each tax year – either by a parent, relative or friends. The money can grow tax-free and is locked away until the child turns 18.

Squirrelling away little and often can add up over time and get the child off to a great start once they become an adult.

Some recipients might use the money to help rent their own home or use it to fund a gap year before starting full-time employment. But for many, it can help meet the growing costs associated with going to university such as tuition fees, accommodation and living expenses.

Many students leave university with debts up to their eyeballs. Therefore, having a plan to fund all costs and avoid debt can make a world of a difference.

Timeline: How long do you have to invest?

The sooner you start, the better. Investing the full £9,000 over 18 years adds up to £162,000 before any investment growth is factored in – significantly more than someone would need for a three-year university course.

In reality, most people won’t have £9,000 spare annually from the moment a child is born.

Childcare is typically the biggest outgoing for parents, on top of their own bills and lifestyle costs, and many people may not have money spare to invest into a Junior ISA until the child goes into secondary school.

Saving into a Junior ISA
Year	Contribution	Balance at end of the year with 5% annual investment growth after charges
1	£9,000	£9,450
2	£9,000	£19,373
3	£9,000	£29,791
4	£9,000	£40,731
5	£9,000	£52,217
6	£9,000	£64,278
7	£9,000	£76,942

Source: AJ Bell

Starting to invest when the child is age 11 still gives you a decent amount of time to build up a pot to fund their studies. Putting the maximum £9,000 into the Junior ISA each year for seven years and achieving 5% investment growth after charges, equates to a pot worth £76,942 at the end.

How much do you need for your goal and how do you want to save towards it?

The annual cost of an undergraduate degree in England and Wales is £9,535 from 1 August 2025. That adds up to £28,605 for a three-year course. In seven years, that figure might exceed £30,000.

The average annual rent for students (excluding London and Edinburgh) was £7,475 in 2023/24, according to the Higher Education Policy Institute and housing charity Unipol. Multiplied by three years and you’ll be looking at £22,425 as a potential benchmark. That could easily exceed £25,000 in seven years’ time.

Research by the Universities and Colleges Admissions Service (UCAS) found that students spent £219 per week on average in late 2022 on other expenses including food and transport. That equates to £11,388 annually or £34,164 across three years.

Given high inflation since that study was carried out, and the likelihood of the cost of living to keep growing in the coming years, it wouldn’t be unreasonable to budget for £40,000 of costs in seven years’ time.

Add the ballpark figures together for tuition, accommodation and other expenses and it comes to £95,000, which means the £76,942 from the seven-year, 5% annual investment growth plan via a Junior ISA is enough to cover a large chunk of the cost and minimise the amount someone needs to borrow for university.

Parents might feel comfortable taking higher risks with this investment plan given the seven-year period. It’s worth noting that the full amount isn’t needed on day one as the costs are spread over a three-year course. Parents could keep contributing money once the child starts their university course if they want to avoid them getting into any debt.

If there was a wobble in the stock market close to the start of the university course, there might be enough time for it to recover before all the bills need to be paid, albeit this is not guaranteed.

See our Junior ISA Open a Junior ISA

4. Your goal: Dream retirement

What type of account? Self-invested personal pension (SIPP)

The money you pay in gets a boost from tax relief and up to 25% is available as a tax-free lump sum at retirement. Your employer or business can also save money into your pension.

Timeline: How long do you have to invest?

Keep in mind that the generous tax perks of a pension mean that you cannot access your money until you reach age 55, rising to 57 in 2028. You can leave it invested for longer if you like and you don’t have to stop working at these ages to access all or some of your money.

How much do you need for your goal and how do you want to save towards it?

A single person might need to generate £14,000 income a year from their pensions and savings as a minimum to enjoy retirement, with the occasional meal out, a UK holiday and some affordable leisure activities.

This rises to £31,300 for a more active retirement including one foreign holiday a year and eating out a few times a month. Living a ‘comfortable’ life requires £43,100 annual income in retirement – with all the figures coming from the PLSA’s latest Retirement Living Standards report.

For many people, the state pension of £11,973 a year from April 2025 already puts people off to a good start. Certain individuals might have also paid off their mortgage by retirement which reduces outgoings and have other savings to help fund their lifestyle. Everyone’s circumstances will be different.

You might be happier with saving a smaller amount into your pension on a regular basis. Or you might be able to put away a lump sum now or use a future bonus. There’s no right answer but keep in mind what you can afford once the essentials are covered and what works best for your goals, particularly as investing is for the long term.

Remember that although investments like shares and funds have generally outperformed inflation over the long term, they aren’t guaranteed to generate positive returns, and their value can change quickly over the short term.

See our SIPP Open a SIPP