Sterling Savvy


How to Invest in Your 20s UK for Beginners

Tobi Opeyemi Amure
Reviewed by:
How to Invest in Your 20s UK

In a nutshell, to invest in your 20s in the UK, start by setting clear financial goals and creating a diversified investment portfolio that balances risk and return, typically including stocks, bonds, and possibly funds like ETFs or index funds. It’s important to take advantage of tax-efficient vehicles like ISAs (Individual Savings Accounts) and pensions, especially the Lifetime ISA, which offers bonuses for savings. Additionally, considering long-term investment strategies and regularly contributing to your investments, even in small amounts, can leverage the power of compounding over time.

Understanding how to invest in your 20s in the UK is a crucial step towards financial independence, and I’ve tailored this guide to help you start on the right foot.

You’ll find straightforward, effective strategies here, geared specifically towards maximising your investment potential in these formative years.

This article was reviewed by Tobi Opeyemi Amure, an investing expert and writer at, and

Quick Steps to Invest in Your 20s in the UK

Here’s a quick step-by-step guide on investing in your 20s:

  1. Establish financial goals: Clearly define your financial goals and investment objectives.
  2. Eliminate high-interest debt: Prioritise clearing any high-interest debts before investing.
  3. Initiate or assess pension plans: Begin contributing to, or regularly reviewing your pension plans.
  4. Create a safety net fund: Ensure you have savings set aside for unexpected expenses.
  5. Explore ISA opportunities: Explore Individual Savings Accounts for tax-efficient savings and investments.
  6. Investigate investment choices: Thoroughly investigate different investment options and markets.
  7. Focus on long-term growth: Focus on long-term gains rather than short-term fluctuations.
  8. Spread investment risks: Spread your investments across various asset classes to reduce risk.

How to Invest Money in Your 20s

Your 20s are a critical decade for setting the financial foundation for the rest of your life.

Investing wisely during this period can yield substantial benefits in the long term.

Here are some key steps to consider:

1. Decide Your Key Financial Goals and Priorities

Before you invest a penny, it’s crucial to identify what you are aiming for. Is it a house deposit, retirement, or perhaps the freedom to travel extensively?

The investment choices you make should align with these objectives. Create a list of short-term and long-term goals and prioritise them.

Your investment strategy should aim to balance risk with potential reward, always keeping your primary objectives in sight.

2. Pay Off Any Debt

High-interest debt, like credit card balances or loans, can erode your financial health faster than any investment can typically grow.

Pay off high-interest debts as quickly as possible before focusing on investing.

This isn’t to say you shouldn’t invest at all if you have debt, but prioritise debts with interest rates higher than the expected rate of return on your investments.

3. Start (or Review) Your Pensions

The power of compound interest is most potent the earlier you start. Consider contributing to your workplace pension scheme if one is available, especially if your employer matches your contributions.

It’s essentially free money. Review your pension plans annually to ensure they align with your financial goals and risk tolerance.

4. Build an Emergency Fund

Before diving into the investment world, it’s wise to have a safety net. Financial advisors commonly recommend having at least three to six months’ worth of living expenses in an easily accessible, low-risk account like a savings account or a cash ISA.

This fund acts as a buffer against unexpected financial challenges like job loss or medical emergencies.

5. Consider an Individual Savings Account (ISA)

In the UK, an ISA allows you to save or invest money without paying income tax on interest or capital gains.

The Stocks & Shares ISA and the Lifetime ISA are particularly attractive for young investors looking for tax-efficient ways to grow their money.

Review the options available and choose one that fits your risk profile and investment objectives.

6. Research Other Investment Opportunities

Your 20s are a great time to explore other investment avenues beyond traditional stocks and bonds.

Consider assets like real estate, commodities, or even investing in a start-up. Always do your due diligence and understand the risks involved.

Each asset class has its risk-reward profile and should be evaluated carefully.

7. Think Long-Term

The investments you make in your 20s are not for quick wins; they are for future financial security.

The stock market, for example, has its ups and downs, but historically it has increased in value over long periods.

By thinking long-term, you can afford to take calculated risks that have the potential for high returns.

8. Diversification is Key

Don’t put all your eggs in one basket. Spread your investments across various asset classes to mitigate risk.

Diversification can be within a single asset class, such as buying shares in different sectors, or between asset classes, like mixing bonds with stocks.

A diversified portfolio is generally less volatile and better positioned for steady growth.

Investing in your 20s may seem daunting, but by taking the right steps, you can set yourself up for a financially secure future.

Remember, the best time to start is now.

What Is the Best Way to Invest Your Money in Your 20s?

In the UK, young investors in their 20s have distinct opportunities and instruments tailored to the British financial landscape.

Here’s a tailored approach for investing in your 20s in the UK:

1. Leverage Compound Interest: The earlier you invest, the more you benefit from compound interest. Your investments earn returns, and those returns, in turn, earn their returns. Over time, this can lead to significant growth.

2. Pensions: Start contributing to your workplace pension scheme early. If your employer offers a match, ensure you’re contributing enough to take full advantage of this “free money.” Pensions are tax-efficient, and even small regular contributions in your 20s can accumulate into a substantial retirement pot due to the power of compounding.

3. Stocks & Shares ISA: Individual Savings Accounts (ISAs) offer a tax-efficient investment method. Any returns or dividends you earn within an ISA are tax-free. A Stocks & Shares ISA allows you to invest in a range of assets, including stocks, bonds, and funds.

4. Diversify Your Portfolio: Whether you’re picking individual stocks or investing in funds, it’s essential to diversify. Spread your investments across different sectors and asset classes to reduce risk.

5. Low-Cost Index Funds and ETFs: Especially for those new to investing, index funds and ETFs can be a great way to gain broad market exposure at a low cost. These funds track specific market indices, ensuring diversified exposure and usually come with lower fees compared to actively managed funds.

Read my comprehensive guides on ‘how to invest in index funds‘ and ‘how to invest in ETFs‘.

6. Lifetime ISA: If you’re saving for a first home or retirement, the Lifetime ISA offers a government bonus of 25% on your contributions, up to a set limit each year. This can be a substantial boost to your savings.

7. P2P Lending: Platforms like Funding Circle or Zopa allow you to lend your money to individuals or small businesses online. While there’s potential for higher returns compared to traditional savings accounts, the risk can also be greater.

8. Stay Informed: The financial landscape and market conditions can change. Regularly review your investments, stay updated on market news, and consider adjusting your strategy accordingly.

9. Robo-Advisors: Platforms like Nutmeg or Wealthify can be a good starting point for those unfamiliar with investing. They provide automated investment solutions tailored to your risk appetite, often at a lower cost than traditional financial advisors.

10. Seek Financial Advice: If you’re unsure about making investment decisions, consider consulting with a certified financial advisor or planner. They can provide tailored advice, helping you navigate your financial journey.

No matter which route you choose, remember that all investments come with inherent risks.

It’s crucial to invest according to your risk tolerance, financial goals, and time horizon.

Given the extended time horizon, those in their 20s can usually afford to take on a bit more risk for potentially higher returns, but always ensure it aligns with your comfort level.

Here’s a good video that discusses and further helps to explain investing for beginners in the UK:

Should I Prioritise Saving Over Investing in My 20s?

The decision to prioritise saving over investing in your 20s is contingent on your financial situation, goals, and risk tolerance.

Generally, it’s advisable to establish a solid financial foundation by building up an emergency fund, typically 3-6 months’ worth of living expenses, held in easily accessible, low-risk accounts like a savings account.

This provides a safety net for unexpected expenses or income loss, allowing you to invest more aggressively later without jeopardising your financial security.

Once you’ve secured an emergency fund and paid off high-interest debts, transitioning into investment becomes a smart move, especially given the long time horizon that allows you to take advantage of compound interest.

Investments typically offer higher returns than traditional savings accounts and are more suited for long-term financial goals. In summary, both saving and investing are important, but the focus may shift from saving to investing once a stable financial base has been established.

Is It Worth Investing in Your 20s?

Investing in your 20s is generally considered a wise financial move for several reasons. First and foremost, time is on your side.

The power of compound interest means that the earlier you start investing, the more time your money has to grow due to interest accumulating on both the principal amount and any accumulated interest.

Secondly, being young often means you can afford to take on a higher level of risk.

While all investment comes with some level of risk, higher-risk investments usually offer higher potential returns. A longer investment horizon allows you to ride out the volatility in riskier assets like equities.

Additionally, investing early provides invaluable experience. The lessons you learn from investing in your 20s will pay dividends (sometimes literally) throughout your life.

Lastly, cultivating the habit of investing at a young age instills a sense of financial discipline that will serve you well in the long run. So, from both a financial and educational standpoint, investing in your 20s is highly beneficial.

Final Thoughts

Investing in your 20s in the UK presents a golden opportunity to lay a solid financial foundation for your future.

Leveraging time, diversification, and a range of investment vehicles—from workplace pensions and Stocks & Shares ISAs to robo-advisors and investment apps—can set you on a path to financial freedom.

Remember, the focus should not just be on immediate gains, but on creating a sustainable, long-term strategy.

Start now, be consistent, and the power of compound interest will do the rest.


Where to invest in your 20s UK?

In the UK, young investors in their 20s can start with platforms like Hargreaves Lansdown or Interactive Investor for a variety of investment options, including stocks, bonds, and funds. Robo-advisors like Nutmeg or Wealthify offer automated portfolios based on your risk tolerance. Consider opening a Stocks & Shares ISA with platforms like Moneybox or Vanguard for tax-efficient saving. Apps like FreeTrade or Trading 212 offer commission-free trading, making it easier to invest with smaller amounts.

How to build wealth in your 20s UK?

To build wealth in your 20s in the UK, start by contributing to a workplace pension to take advantage of employer match and tax benefits. Open a Stocks & Shares ISA for tax-efficient investing in a variety of assets like stocks, bonds, and funds. Consider using robo-advisors or investment apps for automated, low-cost portfolio management. Prioritise long-term investments and diversification to maximise returns and minimise risk.

Is 25 too late to invest?

No, 25 is not too late to start investing. Starting at 25 still gives you the advantage of time, allowing your investments to grow through the power of compound interest. The key is to start as soon as you can, make consistent contributions, and stick with a long-term investment strategy. It’s always better to start late than never start at all.

Is 20 too late to invest?

No, 20 is not too late to start investing; in fact, it’s an excellent time to begin. At 20, you have the advantage of time on your side, making it possible to benefit substantially from the power of compound interest. Starting early also allows you to take on a longer investment horizon, which can afford you greater risk tolerance and potentially higher returns. The sooner you start, the more opportunities you’ll have to grow your wealth over time.

Should I invest at 20 or 30?

If possible, it’s better to start investing at 20 rather than 30 due to the advantage of time and the power of compound interest. Starting at 20 allows for a longer investment horizon, enabling you to take higher risks for potentially greater returns. While investing at 30 is still beneficial, those extra 10 years can make a significant difference in the growth of your portfolio. Both ages are good times to invest, but the earlier you start, the better your potential for building greater wealth.

Investment portfolio for a 25-year-old?

A 25-year-old’s investment portfolio should ideally be diversified and focused on long-term growth. With a longer time horizon, you can afford a higher allocation to riskier assets like stocks or equity-based funds. Consider adding some bonds or bond-based funds for stability, and perhaps a small allocation to alternative assets like real estate or commodities. Always tailor your portfolio according to your risk tolerance, financial goals, and individual circumstances.

How to invest in stocks in your 20s?

To invest in stocks in your 20s, start by educating yourself about the stock market, different sectors, and investment strategies. Open a brokerage account with a reputable platform that offers low fees and a user-friendly interface. Consider starting with index funds or ETFs for diversification, then gradually include individual stocks as you gain more confidence and knowledge. Make regular investments and aim for a long-term strategy to capitalise on the power of compound interest.

Why you should invest in your 20s?

Investing in your 20s offers the advantage of time, allowing you to leverage the power of compound interest for long-term growth. This period also often comes with fewer financial responsibilities, providing more freedom to take calculated risks for higher returns. Early investment experience can provide valuable lessons in financial discipline and market behavior. Starting early gives you more time to recover from any potential losses and refine your investment strategy for the future.

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Will Fenton is the founder of Sterling Savvy. He is a personal finance expert and writes about trading, investing, budgeting, and other financial topics.

Along with his education in Economics & Finance, he has experience working in the financial services industry in London working for one of the UK’s leading financial companies, “a trustworthy and respected provider of news, education and market analysis for the everyday investor”.

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