Why cash feels safe (even when it isn’t)

15 Jun Why cash feels safe (even when it isn’t)

For much of the last decade, cash was easy to dismiss.

Interest rates were close to zero, inflation was low, and investors were often rewarded for taking risks.

Today, the conversation feels very different.

With many savings accounts paying around 4%, a question we hear regularly is:

• Why don’t I just put the money in the bank and avoid all the uncertainty?

It is a reasonable question.

After all, cash does offer something investments cannot.

Certainty.

You know exactly how much is in the account today, and barring any withdrawals, you know roughly how much will be there next year.

In uncertain times, that certainty can feel reassuring.

The challenge is that certainty and safety are not always the same thing.

The hidden risk

Most people think of risk as losing money.

But there is another type of risk that is often overlooked:

• The risk of money gradually losing its purchasing power

If inflation runs at 3% and your savings account pays 4%, the gap is relatively small.

But life is rarely that neat.

Interest rates move.

Tax applies.

Inflation rises and falls.

And over longer periods, cash has historically struggled to preserve real spending power.

A pound that sits safely in an account may not buy the same amount in ten or twenty years’ time.

Nothing dramatic happens.

No market crash.

No headlines.

Just a gradual erosion that is easy to ignore because it happens slowly.

The comfort of cash

This does not mean cash is bad.

Far from it.

Cash has an important role in almost every financial plan.

• Emergency funds
• Planned expenditure over the next few years
• Tax payments
• Property purchases
• Known future commitments

The problem arises when cash becomes the default solution for long-term money simply because markets feel uncomfortable.

Many of the conversations we have with clients are not really about interest rates.

They are about uncertainty.

Cash feels comfortable because it removes the possibility of seeing values fluctuate.

The trade-off is that it may introduce a different risk that only becomes visible years later.

Looking beyond the next twelve months

The right home for money depends largely on its purpose.

Money needed next year should usually be treated differently from money intended to support retirement in ten years’ time.

The question is not:

• What is paying the highest rate today?

The more useful question is:

• What does this money need to achieve, and when?

Once that becomes clear, the answer often becomes clearer too.

Perspective matters

Financial planning is rarely about choosing between cash and investments.

It is about understanding the role each plays within a wider plan.

Cash provides stability.

Investments provide growth potential.

Both have risks.

Both have benefits.

The challenge is making sure today’s desire for certainty does not unintentionally compromise tomorrow’s financial flexibility.

By viewing investing as a natural step forward from saving, rather than a daunting leap, it becomes much easier to begin.

Keeping in mind that investing tends to work best over the longer-term can also help you manage those ups and downs with more confidence.

Because sometimes the greatest risk is not market volatility.

It is standing still.

Tax planning and advice on cash held on deposit are not regulated by the Financial Conduct Authority. 

Approver Quilter Financial Services Limited. June 2026