Should you save cash or invest?

Returns on cash deposits have improved significantly following the Bank of England’s rise in UK interest rates.

This has resulted in banks and other providers of cash products increasing the interest rates that are available on cash products.

Some providers are offering 5.90% or more on a 1-year Fixed Rate Cash Bond.

These rates provide the best returns available on cash deposits for many years.

If you have short term goals, of less than five years for example, then cash savings may be more suitable than investing in the stock market, which can go up and down in the short-term, leading to potential losses.

But sometimes, you miss out on the potential to grow your money by keeping it in cash, particularly if the interest rate doesn’t keep up with inflation.

Cash isn’t risk free

The below graph shows how over the past ten years  inflation has been significantly higher than returns from cash.


Data from FE Fundinfo 2023 30/08/2013 - 31/08/2023

Our cash measure, Moneyfacts 90 day notice10k, is an account that allows access to your funds with notice. The rates on such accounts tend to be higher than those of an instant access savings account.

  31/08/2022 to 31/08/2023 31/08/2021 to 31/08/2022 31/08/2020 to 31/08/2021 31/08/2019 to 31/08/2020 31/08/2018 to 31/08/2019
Moneyfacts 90 Days Notice 10K in GB 2.2 0.5 0.4 0.9 1.0

Investment markets offer the potential to give longer term returns over and above the level of inflation

The graph below shows  how over the last 10 years both the UK and world stock markets have outperformed inflation. It also shows how those markets have recovered from market shocks.


FTSE All World (ex UK) is an index of the world’s stock markets excluding the UK
FTSE All Share is an index of all eligible companies listed on the London Stock Exchange

Data from FE Fundinfo 2023 30/08/2013 - 31/08/2023

  31/08/2022 to 31/08/2023 31/08/2021 to 31/08/2022 31/08/2020 to 31/08/2021 31/08/2019 to 31/08/2020 31/08/2018 to 31/08/2019
FTSE All Share TR in GB 5.2 1.0 27.0 -12.7 0.4
FTSE All World ex UK TR in GB 4.5 -0.6 25.1 7.0 6.6
UK Retail Price Index TR in GB 9.1 12.3 4.8 0.6 2.6

Source: Financial Express; Total returns after charges, income reinvested and adjusted for inflation.

Please remember that past performance is not a reliable indicator of future results.

If you’re planning to put money aside for a long period of time – particularly upwards of ten years – then it might be better to invest, as the stock market has typically done better than cash and inflation over the long-term.

If you’re in any doubt as to whether investing in the stock market is right for you, and how to get started, then talk to an NFU Mutual Financial Adviser.

The value of investments can fall and you may get back less than invested.

When you contact us we'll explain the advice services we offer and the charges.

NFU Mutual Financial Advisers advise on NFU Mutual products and selected products from specialist providers.

Financial advice is provided by NFU Mutual Select Investments Limited.