Understanding how inflation erodes the real value of cash is not enough to get people investing, research finds
57% of Brits hold all or most of their wealth in cash savings, despite 72% acknowledging the risk of inflation eroding the value of their money
Fear of making a loss and lack of trust in markets cited as key reasons for favouring cash
Findings highlight the uphill battle facing politicians trying to get more Brits to invest
Fear and distrust of the stock market is driving millions of Brits to keep all or most of their wealth in cash – despite knowing inflation erodes its value, new research reveals.
The research, commissioned by modern mutual Scottish Friendly, shows 42% of British adults keep all their wealth in cash and 15% hold most in cash, even though the vast majority (72%) know it could make them poorer over time.
When respondents were asked why they favour cash, the most common reasons were the ability to access money quickly (39%), fear of making losses (38%) and a lack of trust in markets (34%).
The findings underline the challenge for the Government, which wants to get more people to invest, not only to improve their own returns but also to support British growth companies.
Concern about losses was especially strong among women (44% vs 33% of men) while men were more likely to say they distrusted markets (35% vs 33% of women). Some 40% of men and 38% of women said they hold their money in cash because they want quick access to it.
The study also highlighted a striking age gap, with Gen Z (54%) most likely to say they need quick access to their cash, followed by Baby Boomers (41%), Gen X (39%) and Millennials (35%).
However, Baby Boomers (40%) were considerably more likely to say they distrusted markets than Gen X (33%), Millennials (24%) and Gen Z (23%).
Baby Boomers (44%) were also more likely to say they couldn’t afford to lose money than Gen X (41%), Millennials (26%) and Gen Z (15%).
Therefore, it is perhaps unsurprising that Baby Boomers (56%) were far more likely to hold all their wealth in cash, followed by Gen X (44%), Millennials (25%) and Gen Z (21%).
However, Millennials (18%) were most likely to invest some of their wealth but keep most in cash, followed by Gen X (15%), Gen Z (13%) and Baby Boomers (12%).
Scottish Friendly savings specialist Kevin Brown said: “This data shows the extent of the mental gymnastics that millions of British adults tie themselves up in. People in the main understand the risks of keeping their savings in cash over the long term but they nonetheless cannot make the leap to invest. The result is they are making themselves poorer. By keeping all or most of their wealth in cash, results in inflation eroding its true value.
“The reluctance to invest isn’t just caution; it reflects deep-rooted fear of losing money, particularly among older generations, who are most likely to avoid stocks and shares entirely. Younger adults are slightly more willing to take some risk, but many still prioritise cash for quick access and are therefore missing out on the potential long-term growth investing can offer.
“This also affects the economy, leaving domestic companies short of the capital they need to grow. The Government wants more people investing, but our data shows how much of an uphill struggle it will be to convince UK adults to dip their toes into the stock market.
“If Britain is to shift from a nation of savers to a nation of investors, then the industry needs to better educate and provide practical guidance to show that investing isn’t reckless but instead provides greater potential in the long-term to prevent their wealth from eroding in value over time.”
-ENDS-
For more information contact:
MRM
07793 564 351
Notes to Editor:
Remember that the value of investments can go down as well as up and the child could get back less than you paid in. Past performance is no guide to future results. Tax treatment depends on individual circumstances which can change in the future.
About Scottish Friendly
Scottish Friendly is a leading UK mutual life and investments organisation. It provides its members and their families with a wide range of investment and protection solutions and provides life and investment products and services to other financial organisations.
Scottish Friendly has roots stretching back to 1862. Established as the City of Glasgow Friendly Society, its name changed in October 1992 when it took over Scottish Friendly Assurance.
Scottish Friendly, Galbraith House, 16 Blythswood Square, Glasgow, G2 4HJ
Scottish Friendly Assurance Society Limited. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
Scottish Friendly Asset Managers Limited. Authorised and regulated by the Financial Conduct Authority.