Cash Magnets

Cash seems to have this interesting alure here in the UK. In our recent Ideal Home Show exhibit we quizzed everyone on their cash balances. What was remarkable was the high level of cash savings people are making, which was great to see. Disappointingly, however is how they are allocating and managing these funds, often carrying far too much in cash, at the cost of thy future self. 

Find your peace of mind, sleep at night figure. We typically say have been 3-12 months worth of expenses in cash, to cover your short term requirement’s. Inflation over this period is less of a concern and its more about having the money when you need it, so find your sleep easy figure that works for you.

Keep it simple - You don’t need 15 different providers, offering 15 different rates. Its confusing, hard to manage and creates a lot more work for you than I’m sure you’d like. Minimise the faff with a one (ideal) or a few if needed for full protection

Your protected - Your money is protected up to £120,000 (£240k joint couple) by the government, so ideally you can spread cash between providers where it is higher, otherwise for most, one solution is perfectly fine

Use NS&I - The key benefit here is you have full government backing on your funds, therefore there is not really any meaningful risk to your money with this guarantee. Check out options here (alternative rates/providers available below)

Maximise your interest rate - Shop around for the best rates and be prepared to switch if alternatives become more attractive (check this page for the current top rates, but don’t sweat it for a few % points

Stop using your current account - You will get little if not no return from cash piles sitting in your current account, yet I see this very often. Your current account is for your earnings/ your income, and month by month expenses, not for lumps of cash, so separate it out where you can

Think beyond the ‘big banks’ - More often than not the interest rate returns on cash they offer can be extremely poor. Challenge this head on and look beyond your current bank for the best offers

Get excess cash working for you - Most people spend their lives working for their money, instead of letting their money work for them. Once you have you cash buffer/funds for short term needs, this is where you can lean into the great companies of the world (the stock market) to generate potential inflation bursting returns over the long term. Play the game at hand

Keith Boyes

Chartered Financial Planner

Managing Director

Spentwell

Photo by Jason Leung on Unsplash