Experts reveal exactly how much you need in an ISA to make £1,000 per month | Personal Finance | Finance

With the cost-of-living continuing to bite for Brits across the land, earning passive income on top of your earnings generated through work is a great way to boost your bank balance. Investing in an ISA (Individual Savings Account) is one of the most popular ways of doing this.

But what sort of ISA should you take out, and could you make as much as £1000 a month by using one? The answer to the second question is: yes, you can. Now, let’s turn to what ISA you could take out.

If you’re trying to markedly boost your passive income and earn £1,000 more a month, then you’ll want a Stocks and Shares ISA. These are riskier than the most popular alternative: a Cash ISA. 

With a Stocks and Shares ISA, you can invest in company shares, unit trusts and investment funds, corporate bonds, and government bonds. Although you can earn more than a Cash ISA this way, you need to understand that the value of your investments may go up and down, and that your capital is at risk.

A Cash ISA is lower risk, but your earnings may be lower than inflation. So, if you want a much larger passive income, you probably will want to use a Stocks and Shares ISA. But how much do you need to invest to earn upwards of £1000 a month?

According to financial experts at Motley Fool: “A grand a month translates into £12,000 a year. And if we’re following the classic 4% withdrawal rule, that means a portfolio needs to be worth around £300,000 to supply this.

“Obviously, that’s not pocket change and might make this seem like a fruitless endeavour. However, the good news is, even with only £500 to spare each month, most households can gradually build to this target over time, thanks to compounding returns.”

“When looking at the long-term performance of the FTSE 100, the UK stock market’s historically provided an average return of 8% a year. Investing £500 a month at this rate when starting from scratch would eventually reach the target £300,000 in around 20 years. That means even someone who’s just turned 40 should still have enough time to get the ball rolling for their retirement.”

It comes as money expert Martin Lewis warned cash ISA limits could be cut as low as £10,000.