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How safe is my cash?

By Pauline Bowden
This article is published on: 17th February 2021

Many people view cash as a safe investment because they’re not exposing their money to any direct stock-market risk. However, tying up too much of your savings in cash doesn’t mean you are risk free. Low interest rates: Interest rates are at historically low levels.

This is not good news for savers. That’s because the interest is unlikely to grow their money enough to help them achieve their financial goals. Then there’s the effect of inflation. Inflation erosion: Whilst inflation is at such a low level, you may think to yourself why should this matter? When it comes to your longer term investment plans, typically 5-10 years, you should consider how much the price of goods has risen over the last five years. If the cost of goods has risen, for example 1%-3% a year, and the interest rates continue to be low, it becomes clear how the purchasing power of cash savings may actually fall over time.

What are savers looking to do with their cash?
If you’re sitting on too much cash, either in your bank account or your investment portfolio, you could be missing out by not being fully invested. Tax efficient investments, compliant in Spain may be your answer to a diverse investment portfolio.

Cash is no longer the safe haven people once considered it to be, for long term investment. While it’s important as part of your financial plans, having too much could mean your money isn’t working as hard as it could, meaning that you may not realise your financial goals. Everyone should have a cash buffer in case of emergencies, but it’s important to get the right balance between your short- and long-term plans. This is where professional advice becomes invaluable.

Speaking to a financial adviser will help you to identify the most suitable way for you to make the most of your cash. Together you’ll be able to define your aims as well as formulate a personalised plan.

Article by Pauline Bowden

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