A recent report1 estimates 13 million UK adults are sitting on £430bn of cash savings. The report, titled ‘Empowering retail savers to engage with investing’ suggests savers are “missing out” on earning better returns over the long term.
The research highlights three reasons why savers are reluctant to invest:
- Too many options:
One in five (21%) people with savings don’t think they have the knowledge to choose what to invest in, while 24% think investing is too complicated
- Not confident with comparing investments:
Nearly three quarters (74%) need help to determine which type of investment is suitable for them, while two-thirds (63%) want assistance in comparing investment products
- Too worried about risk:
Almost half (43%) of savers think investing is too risky and could mean they “lose all their money.”
What is the long-term cost of saving instead of investing?
Financial software firm Oxford Risk believes choosing saving over investing carries a high cost, with savers missing out on up to 5% a year in lost returns. The firm is also concerned that a growing number of UK adults are choosing to ‘sit on the sidelines’ by keeping their money in cash.
What can be done to close the investing gap?
The Financial Conduct Authority (FCA) has made addressing cash holdings a strategic priority and Oxford Risk has urged, ‘More needs to be done beyond just raising awareness of the issue to drive the vital change in investor behaviour.’
Holding a proportion of your wealth in cash is worthwhile for liquidity, emergencies and short-term needs. However, history has shown that over the long term, investing yields higher returns than holding cash, although not guaranteed. The key is balance: keep enough cash for security but invest the rest to build wealth over time. Diversification to spread the risk is important.
1Barclays, 2024
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