When I set up my first ETF savings plan in 2021, the biggest question was how much to put in each month and what it would actually amount to. I had no good answer until I started running the numbers properly. Turns out the answer is more encouraging than most people expect.
What Is an ETF Savings Plan?
An ETF (Exchange Traded Fund) tracks an index like the MSCI World or FTSE All World automatically. It holds hundreds or thousands of stocks globally, at very low annual costs (typically 0.1–0.2%). A savings plan invests a fixed amount automatically each month, without you having to time the market.
Concrete Numbers: What Does Monthly Saving Return?
Globally diversified ETFs (MSCI World) have historically returned around 7–8% p.a. We use a conservative 7%:
£100/month at 7% annual return
After 10 years: £17,409 (invested: £12,000) → Compounding gain: +£5,409
After 20 years: £52,397 (invested: £24,000) → Compounding gain: +£28,397
After 30 years: £121,997 (invested: £36,000) → Compounding gain: +£85,997
£200/month at 7% annual return
After 10 years: £34,819 (invested: £24,000) → Compounding gain: +£10,819
After 20 years: £104,793 (invested: £48,000) → Compounding gain: +£56,793
After 30 years: £243,994 (invested: £72,000) → Compounding gain: +£171,994
£300/month at 7% annual return
After 10 years: £52,228 (invested: £36,000) → Compounding gain: +£16,228
After 20 years: £157,190 (invested: £72,000) → Compounding gain: +£85,190
After 30 years: £365,991 (invested: £108,000) → Compounding gain: +£257,991
How to Choose the Right ETF
- Broad diversification: MSCI World (1,500+ companies) or FTSE All World (3,700+ including emerging markets)
- Low costs: TER under 0.20% p.a., higher costs eat into returns over decades
- Accumulating: Dividends automatically reinvested → maximum compounding
- Physical replication: The ETF actually holds the shares, not synthetic derivatives
- Fund size: At least £100M, smaller funds risk being closed
ETF Savings Plan vs Cash Savings Account
Both have their place. Cash savings (ISA, easy access) are ideal for your emergency fund (3–6 months' expenses) and short-term goals up to 3 years. The ETF savings plan is the tool of choice for long-term wealth building over 10+ years. The ideal combination: emergency fund in cash, everything beyond that in the ETF plan.