Laura Whateley
Money Expert
August 11, 2021

Investing vs keeping your money as cash

We recruited leading UK finance journos, Laura Whately and Kara Gammell, to explain how investing differs from saving. 

You invest to grow your money. There are many different things, or “assets” that you can invest in, with the hope that in years to come they will be worth considerably more than you paid for them. This might include art or vintage wine, bitcoin or antiques, a two-bedroom flat in that up-and-coming area with the new organic bakery, or, as we’ll concentrate on in this article, the stock market. 

If you keep all your savings in cash under your mattress they are not going to become any more valuable than they are at the moment, in fact, the reverse. Inflation means cash savings can quickly lose value. The £20 you have in your pocket will buy much less than it does now, in 20 years time. A can of soft drink and a bus ticket costs much more in pounds and pence in 2021 than it did in 2001. 

If you upgrade from a mattress to a cash savings account you will receive interest, which is a percentage return on your money. But unless the interest rate you receive on your savings is higher than the inflation rate, far from guaranteed in this ultra-low interest rate environment, your cash savings are actually losing money.

Even with interest, how much your cash will grow is pretty limited. The received wisdom is that investing your money, on the other hand, has a much better chance of significantly beating inflation and the rate you get from any bank interest (over the medium to long term). 

So, why should you invest? 

You seldom hear a rich person talk about their spending, more often it is their investments that they focus on.

According to an authoritative study by Barclays that uses data going back to 1899, the probability that shares outperformed cash savings was 75% over five years, increasing to 90% over 10 years and 99% over 18 years

While figures data from Moneyfacts shows that the average stocks and shares ISAs, for instance, delivered positive growth in 11 out of 18 tax years since they were introduced in 1999.


What are the advantages of investing your savings?

Investing your savings means that you are more likely to achieve a higher rate of return on your money than you’ll get from holding cash (over the medium to long term). Remember, as with all investing, it also means an increased risk of loss of capital.

Laith Khalaf, financial analyst at AJ Bell, explained: “The average rate on instant access deposit accounts sits at 0.06% and on Cash Isas sitting at 0.32%.

“The Bank of England expects inflation to be 2.1% over the next year, so most cash in the bank is going to be losing its buying power. For investors looking to put money away for the longer term, the stock market looks more attractive than cash, albeit it carries higher risk.”

Our first funds offer historical average annual returns of up to 8%*, and we’re planning to add more! (Remember that past performance is not a reliable guide to future returns.) 

Head to your Chip app to explore the three funds powered by BlackRock, the world’s biggest asset manager.

With investing, your capital is at risk.

Past performance does not indicate current or future performance, and should not be the only thing you consider when selecting a fund. The value of your investments can go down as well as up and you may get back less than your original investment. 

*The average annual return is a percentage that shows the average increase in value of a fund over the last five years. It is calculated using the annual return of the fund for the previous 5 years or the lifetime of the fund (if trading for less than 5 years ) and then averaging that number. The average annual returns we display are based on the past performance of each fund. We get this information directly from the fund manager at BlackRock. You can find past performance details in the fund's Key Investor Information Document (KIID).

When investing your capital is at risk

Remember your Capital is at Risk and past performance is not a reliable guide to future returns. The value of your investment can go down as well as up and you might get back less than you originally invested.

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