No savings at 30? I’d shoot for a million by drip-feeding £10 a day into a Stocks & Shares ISA

I opened my first Stocks and Shares ISA last year, aged 27.

According to finance gurus, I should have already saved one year’s salary by 30 if I want to arrive at retirement with a plush nest egg.

It’s safe to say that I haven’t hit that target yet. And I’m not alone: in fact, 40% of adults under 30 have zilch saved up.

But by saving just £10 a day, my calculations show I could go from zero to retiring with £1m in the bank.

Choosing the right vehicle

I would drip-feed that £10 a day into a Stocks and Shares ISA.

This type of account allows regular punters like me to buy shares in some of the finest companies in the world – like Apple, Microsoft, and AstraZeneca. Historically, 8%-10% has been the typical annual stock market yield per year. Of course, investing in the stock market is risky and future returns are never guaranteed.

An alternative would be a Cash ISA. The returns I’d see in this account are linked to interest rates, which are 4% currently. The advantage here is I would avoid the type of volatility that is standard in the stock market.

Let’s run the numbers and watch how my £10 per day could grow in both types of accounts.

The power of compounding

Saving £10 a day could get me to £1m before I retire – even starting from nothing. However, I’d have to do it in a Stocks and Shares ISA.

The FTSE 100 – an index of the 100 largest companies listed on the London Stock Exchange – has historical annual gains of about 8%. On the other hand, the FTSE 250 – the 101st to the 350th largest companies – has returns of about 10%. I took a 9% annual return as the basis of my calculations.

As the table below shows, in a Stocks and Shares ISA, I could smash through the million-pound mark by the time I reached 70, setting me up for a comfortable retirement.

However, if I’d been just as thrifty but saved into a Cash ISA for those 40 years, I’d still be a long way off my target.

Depressingly, it would take 64 years before I reached £1m under the assumed 3% rate of return in a Cash ISA.

An extra push

If I wanted to hit the one-million mark even sooner, I could try investing in individual stocks.

For example, if I’d invested in Alphabet in 2005 I’d have netted 2,000% returns up to now. That beats the slow and steady FTSE 100, which is up 60% over the same period.

Of course, investing in individual stocks is riskier, because I could easily choose a dud instead of a diamond and lose all my money.

Shooting for a million?

I’m not stressing about getting to £1m in reality.

My philosophy is to diligently keep putting spare cash away in my Stocks and Shares ISA.

I’ll let the magic of compound interest do the rest.