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What to do with cash holdings

ended 14. February 2022

The Bank of England has raised rates twice in recent months. In response, banks were quick to hike their mortgage rates, yet savings rates, for the most part, banks have left untouched.

With nearly £900 billion sitting in low-or-no interest accounts according to UK Finance, what advice are you giving to your clients holding cash?


 

3 responses from the Newspage community

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Rob Peters
Principal at Simple Fast Mortgage
Long has it been the mantra of smart financial planning to hold a balanced portfolio. This involves holding some cash for emergencies and short-term spending needs to compliment a balance of other asset classes and types for longer-term financial planning. Cash has never been a good home for the long-term, providing poor income and capital growth returns relative to the alternative options available. Even those with a low risk tolerance can find better potential returns elsewhere. This statement has never been more true than today, with low savings rate and high inflation producing a negative return.
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Graeme Inglis
Director and Chartered Financial Planner at Poise Financial Planning
I would always recommend holding some funds in a bank or building society account for emergencies and planned expenditure. Any money in excess of this should be reviewed in line with a person's attitude towards risk and reward. Good options to obtain growth over the medium to longer term are pensions and ISAs. Both of these arrangements have tax benefits as well as giving money the opportunity for growth in excess of interest rates.
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Joshua Gerstler
Chartered Financial Planner at The Orchard Practice
"Get your money out of cash. Inflation is eroding the value of your savings every day. Once you have enough in cash to cover any emergencies, the rest should be invested in a well diversified global equity portfolio."