Could your money be working harder?

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Soaring inflation could mean that those who leave excess money in cash risk missing out on their long-term financial goals.

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21 April 2022 | 3 minute read

Low interest rates and soaring inflation could mean that those who leave excess money in a cash savings account risk missing out on their long-term financial goals.

Our analysis shows that cash has delivered paltry returns over the past two decades, especially when compared with investing in the stock market.

Here, we explain what the figures mean for you, and how to give your money the best chance of growing over the long term.

Cash offers very little real growth

We looked at the ‘real’ returns on cash savings between 1999 and 2022. Real returns take into account the impact of inflation, which is a measure of how much prices for goods and services increase over time.

Inflation is an important risk for savers to consider, as it can have an extremely limiting effect on your money’s spending power over the long term. In a low interest rate environment, the real value of cash savings may even decline. Over the last 13 years, interest rates have been stubbornly low, after the Bank of England slashed the base interest rate during the global financial crisis.

Our research found that if you had put £100 in a cash savings account in 1999, its real value would have risen to just £103.80 by February 20221. That’s a gain of only 3.8% in two decades.

Make your money work harder

We compared the returns on cash with those of the stock market, and found that investing offers significantly higher potential returns over the long term.

If you invested £100 in the FTSE 250 over the same 23-year period, its real value could have grown by over 300% to an impressive £411.10, assuming dividends were reinvested and after adjusting for fees2. The FTSE 250 consists of small to midsized companies which tend to benefit when interest rates fall; typically because business financing becomes cheaper. Based on the same assumptions, investing in the FTSE All-Share or FTSE 100 could have seen your £100 grow to £175.50 and £148.90, respectively.

Cash vs equities – real returns since 1999

Although the stock market is volatile, it’s worth bearing in mind that the past two decades have seen significant economic events, including the global financial crisis, Brexit and the coronavirus pandemic. Despite this, the stock market has continued to climb, given time.

Cash vs investing – what to consider

This isn’t to say you should put all your money in the stock market. It’s really important to keep at least six months’ worth of essential expenditure in an easy-access savings account to cover unforeseen emergencies and unexpected bills. A cash savings account is also useful for funding short-term goals that are less than five years away. Cash avoids the risk of having to resort to loans or selling investments that have fallen in value.

When it comes to goals that are further away, history shows that investing tends to offer the greatest chance of long-term growth. The stock market carries investment risk, but you can mitigate this by spreading your money across different asset classes, sectors and regions. How much you invest in each asset class will depend on your individual circumstances and attitude to investment risk. A financial adviser can help you build a portfolio that provides the right balance of risk and return for you.

Next steps

If you’re planning for the long term, it’s really important to ensure your money is working hard enough. Investing could help you reach your goals more quickly, but deciding how much to invest, and where, isn’t always straightforward. This is where taking some financial advice can help. A financial adviser will assess your financial and personal circumstances, and create a solid financial plan that ensures you’re on track for a secure financial future.

1 Interest rate used is one-month SONIA. Real returns are calculated using the UK Consumer Price Index.
2 Assumes fees of 0.5% per year.


The value of investments, and any income from them, can fall and you may get back less than you invested. Neither simulated nor actual past performance are reliable indicators of future performance. Investment values may increase or decrease as a result of currency fluctuations. Information is provided only as an example and is not a recommendation to pursue a particular strategy. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

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