There's a comfort that comes with logging into your banking app and seeing a healthy balance sitting there. It feels safe and reassuring, like your money is protected.
That's true, to a certain extent - but whilst your balance might not move, the value of that money is quietly shrinking.
Inflation (the rising cost of living) is the invisible hurdle that works against your savings. If inflation is 3% a year, £10,000 in your account today is equivalent to £7,400 in ten years' time. You haven't lost money on paper, but in real life… beyond the banking app, your money buys less.
That's the silent cost of keeping too much cash.
However, cash is still important. It plays a crucial role in certain financial plans. Specifically, your emergency fund which needs to be easily accessible in any case… and short-term goals. Think, money you'll need in the next couple of years. In these cases, cash absolutely is king. It's liquid, accessible and reliable.
The problem comes when all of your money is sitting in cash, often because it feels safer than investing. The reality is, this approach leaves your wealth exposed to inflation erosion.
It's the financial equivalent of storing items in your fridge for too long. They'll look fine for a while… but eventually they'll go stale and you can't do as much with it as you could before.
So, what should you be considering?
- Keep your emergency fund & short-term funds in cash - it still serves a purpose
- Consider your time horizons - money that you won't need for at least 5 years, could be working harder in investments
- When investing - start small if it feels intimidating
The idea is not to abandon cash, it's about balance. Your emergency fund keeps you safe today whilst your investments protect your future self.
As a reminder, with investing - Capital is at risk.
✉️ This newsletter was originally sent to subscribers on 20th August 2025. Want to get future newsletters straight to your inbox? Subscribe here.