Is the UK’s cash obsession hurting your financial plan?
If you’re cash-obsessed like 66% of the UK, you may be limiting how much wealth you can grow. Learn the importance of striking a balance between saving and investing and how a financial planner can help.
The UK has long preferred saving in cash over investing.
According to MoneyWeek, out of the 15 million ISA accounts held in the UK in the 2023/24 tax year, over 10 million were Cash ISAs, making up 66% of the total.
Gov.uk also reports that the UK has the lowest level of retail investment – referring to non-professional and individual investors – out of all the G7 countries.
Brits have often been attracted to the relative security of cash savings. Yet, by funnelling more wealth into savings accounts, you might be missing out on valuable growth opportunities you could achieve with investing.
Keep reading as we examine the UK’s cash savings psychology and explore how you can strike a balance between saving and investing with the help of a Kellands financial planner.
UK savers tend to favour a conservative approach when it comes to saving and investing
The Times reports that Americans invest 77% of their savings into stocks and shares.
By comparison, Brits only invest 35% – a gap which could amount to £100,000 in lost long-term wealth.
So why do UK savers possess such a strong cultural risk aversion to investing?
Studies reported by interactive investor have found that the UK harbours a “safety-first” instinct when it comes to saving. This reluctance to take risk stems from various factors, such as historical market losses, as well as misconceptions about the nature of investing.
While investing carries risk, it also offers the opportunity for long-term reward
Misunderstanding the concept of risk vs reward can hinder many Brits from accessing the potential benefits of investing.
Risk can be higher or lower depending on what you invest in, as can the reward. For example, bonds are generally considered lower risk than equities and, in return, typically offer lower long-term growth potential.
Conversely, equities generally have higher risk than bonds, but have historically also offered greater potential for long-term growth.
However, regardless of the risk level, investing offers the potential for stronger long-term returns than cash, although this isn’t guaranteed.
The level of risk you want to take with your investments depends on your appetite, as well as your:
- Capacity for loss
- Investing experience and knowledge
- Investing time frame
- Current portfolio structure (if you already have one).
A financial planner can help you discover yours.
Cash is important for covering emergencies as well as your short-term goals…
Cash has an important place in your financial plan as a valuable source of easy access, flexible wealth. It’s reliable for helping you achieve your short-term goals, such as:
- Holidays
- New cars
- Home renovations
- Deposits for a new house
- Clearing debt
- Paying for your child or grandchild’s wedding.
If your bank is regulated by the Financial Services Compensation Scheme (FSCS), your cash is also protected up to £120,000 per person.
Cash can act as a valuable buffer against unexpected emergencies. For example, if your roof suddenly collapses, a store of cash savings can help you cover costs quickly. Otherwise, you would have to sell off your investments, which could take time and may mean you have to sell when they are at an unfavourable value.
For your medium-term goals, say those approaching in the next three to five years, you may want to have a combination of lower-risk investments and cash.
…But investing can provide you with more opportunity for long-term growth
However, it’s important to note that cash can be vulnerable to inflation, which can erode the real value of your savings over time.
Returns on investments are not guaranteed, but they typically have a stronger chance of outpacing inflation over the long term.
To put this into perspective, Barclays found that, between 2006 and 2025, a £20,000 balance would have grown to £123,660 if invested in global equities, whereas cash savings would have only reached £25,590. Moreover, due to the effects of inflation, £20,000 cash in 2025 would only buy the equivalent of £11,252 in 2006, so money held in cash over that period would have lost much of its real value.
Between those years, several periods of market volatility would have caused your investments to fluctuate in value, including during the:
- 2008 financial crash
- Eurozone crisis
- Covid-19 pandemic.
Despite these setbacks, markets recovered and have delivered strong growth over the period as a whole. This is a consistent theme in history, but it’s important to remember that your wealth and financial plan can still suffer from short-term market setbacks.
Strike the right balance with a Kellands financial planner
When it comes to saving and investing, a balance is important for supporting both your short-term security and your long-term growth opportunities.
For example, you might hold on to enough cash to cover your essential costs for around three to six months, as well as for any short-term goals you have approaching.
Once you have a comfortable financial buffer in place, you can decide how to allocate and invest any remaining wealth that you don’t need in the short term to help ensure it has the best opportunity to grow over the long term.
At Kellands, our award-winning team can help you find this balance. We provide you with a bespoke plan for your cash and investments, perfectly aligned with your specific risk profile and circumstances.
Learn more about how our advice could take your wealth further by emailing us at hale@kelland.co.uk, or calling 0161 929 8838 today.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.