There’s a good chance that you’ve heard the phrase “cash is king” at some point in the past. It suggests that having readily available disposable wealth is far more valuable than any other asset.
While it is true that setting aside cash for a rainy day is undoubtedly beneficial, it’s vital to note that holding too much could make it more challenging to achieve your long-term goals.
Despite this, MoneyAge reveals that 56% of DIY investors increased their exposure to cash in the three months between February and April.
This is somewhat understandable. 2025 has already been marked by considerable uncertainty, with the U.S. President, Donald Trump, introducing trade tariffs that resulted in significant global volatility.
Due to the perceived safety of cash, these events resulted in a 10% rise from DIY investors increasing their cash holdings since the Autumn Budget last year, which previously stood at 46%.
Continue reading to discover why holding too much cash might be unwise, and why investing might offer a more beneficial alternative.
Inflation may erode the real-terms value of your wealth if you hold too much as cash
Many people often view cash as a safer alternative to investing, which is why it might seem so attractive to savers in the U.K. in recent months.
Indeed, you simply place your wealth in an easy access savings account, which allows you to withdraw funds whenever you like, but it usually pays a lower rate of interest.
Alternatively, a fixed-rate account requires you to lock away your savings for a set period of time, usually in exchange for a higher interest rate.
Unlike investing, savings don’t fluctuate in value. There is no risk of market downturn affecting your overall balance, either.
However, while cash might offer short-term security, holding too much of your wealth in this way can be unwise.
This is because, over time, cash is less likely to keep up with inflation compared to other forms of investment.
When inflation is higher than the rate of interest you receive from your savings, their real-terms value can be eroded.
An inflation calculator from the Bank of England (BoE) shows that £10,000 of goods and services in 2000 would cost £19,117 in July 2025.
This means that prices have almost doubled over 25 years. As such, interest on your savings would need to match this at the very least. Otherwise, its purchasing power is reduced, meaning goods and services are more expensive relative to the increase in the value of your savings.
Granted, the Office for National Statistics states that the Consumer Prices Index (CPI) stood at 3.8% in the 12 months leading to August 2025.
Meanwhile, the best rate offered by an easy access savings account as of 28 August 2025 is 4.75%, Moneyfacts reveals.
This means that your cash savings would currently manage to outpace inflation.
But, this generally won’t be the case long term. So, you need to ensure you are receiving as much interest as possible, as your savings could lose real-terms value over time.
Investing could offer more competitive returns over the long term
If your aim is to grow your wealth over time, you may find that investing is the wiser option. This is partly due to the fact that it typically offers more competitive returns compared to cash savings alone.
As an example, MoneyAge reveals that if you had maximised your ISA allowance each year since 1999, placing your wealth into a Cash ISA would have generated an average annual return of 2.85%.
Over that period, this would have grown by around £23,199 in real terms.
Meanwhile, investing the same amount into FTSE 100 companies would have yielded an average return of 4.4%. This would amount to £157,591 – a difference of more than £134,000 in real terms.
Investing might also offer more opportunities to outpace inflation over the long term.
Cash could still allow you to achieve your shorter-term goals
Of course, while investing might offer more competitive growth over longer periods of time, it’s vital to note that diversification is essential.
Cash can also still play a valuable role in your financial plan, too.
For example, you might want to set some cash aside to cover an emergency, such as unexpected home repairs or a short period of unemployment.
Keeping wealth in an easy access savings account could ensure you can meet these expenses without exhausting funds earmarked for other purposes.
Similarly, holding cash might be sensible if you’re saving for another short-term goal, such as purchasing a car or going on holiday.
However, for longer-term goals, namely planning for retirement or funding your children’s higher education, you may prefer to invest across a range of sectors, geographical areas, and asset classes.
Doing so could deliver the growth needed to achieve your goals, while spreading risk.
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We could help you determine how much you need to save and invest to meet your short-, medium-, and long-term goals.
Please use our search function to find your nearest Verso office, or for Verso Investment Management enquiries, please contact us at info@versoim.com or call 020 7380 3300.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.