I See This A Lot!
So, you’ve just been paid or received your monthly pensions and you’re feeling flush. You lovingly withdraw crisp notes from the cash machine, stack them neatly, and slide them under your mattress. Or, you leave your money in a current account that pays little to no interest.
Congratulations! You’ve just invented your own very soft, very unregulated bank. But before you start feeling like a financial genius, let’s be honest, that mattress of yours isn’t going to pay you any interest. In fact, over time, it’s going to cost you. Because while cash may feel safe, in the long run, it’s like showing up to a marathon in flip-flops. Comfortable at first, but ultimately a terrible strategy.
Let’s talk about why investing beats sitting on cash.
Inflation: The Silent Pickpocket
The number one villain in this story is inflation. It’s sneaky. You don’t see it coming, but slowly and surely, it erodes the value of your money.
Say you’ve got £10,000 tucked away in a shoebox. In ten years, thanks to inflation that same £10,000 might only buy you what £7,500 buys today. Meanwhile, your shoebox hasn’t grown a penny fatter. Your cash is essentially on a diet it didn’t ask for.
Investing, however, has historically outpaced inflation. Stocks, bonds, property, etc are the gym memberships your money actually uses. They might have some ups and downs (like that one friend who insists press-ups are “fun”), but over time, they make your wealth fitter, stronger, and better able to outrun inflation.
Compound Interest: The Eighth Wonder of the World
Albert Einstein allegedly called compound interest the “eighth wonder of the world.” (Although it’s possible he also said “Don’t believe everything you read on the internet.”).
Here’s the deal: when you invest, your returns generate their own returns. That’s money having little money babies, and those babies having grandbabies. It’s a family reunion you’ll actually look forward to.
Let’s say you invest £5,000 at an average return of 7% per year. In 30 years, without you lifting a finger, that pot turns into nearly £38,000. Leave that same £5,000 in cash? Well, it’s still £5,000. Unless you count the dust mites.
Risk: It’s Not What You Think
A lot of people hoard cash because they think investing is “too risky.” But here’s the plot twist: over the long term, not investing is riskier.
Sure, markets wobble. Sometimes they plummet. Sometimes they soar. But if you zoom out, the trend has historically gone one way: up. In contrast, cash is guaranteed to lose value over time. That’s not volatility, it’s certainty.
It’s a bit like refusing to get on a plane because you’re afraid of turbulence, then deciding to walk across the Atlantic instead. Spoiler alert: one strategy will get you there; the other gets you very wet.
Your Future Self Will Thank You
Think of investing as doing a favour for your future self. Right now, you might be tempted to keep everything in cash so you can “play it safe.” But future you, the one who wants to retire, travel, and maybe order steak (sorry if you’re not a meat-eater!) without checking the price first, will be eternally grateful if you choose investing instead.
Because future you doesn’t just want money that exists. They want money that works. And money that works is what investing is all about.
The Psychological Trap of Cash
Let’s face it, cash is seductive. It feels tangible and safe. You can touch it, count it, sniff it (though please don’t, that’s weird). But that safety is an illusion.
It’s like keeping a chocolate bar in your pocket for a rainy day. Sure, it’s there. But after a while, it melts, it spoils, and it definitely won’t taste as good as it did on day one. Investing is like putting that same chocolate bar into a magic cupboard where, over time, it turns into an entire dessert buffet.
A Balanced Approach
Now, let’s not get carried away. I’m not saying sell your furniture and buy shares in obscure tech start-ups. Cash does have its place. You need an emergency fund, money for unexpected car repairs, medical bills, or the time your washing machine starts sounding like it’s trying to communicate with aliens.
But beyond that? Letting excess cash sit around is like leaving milk on the worktop. It’s just not built to last.
Final Thoughts: Don’t Let Your Money Nap Forever
At the end of the day, investing isn’t about getting rich quick. It’s about making sure your money doesn’t get lazy. Because cash left idle is like a teenager who refuses to move out of the house: it eats away at your resources and doesn’t contribute much.
Investing, meanwhile, is like sending your money off to university, where it learns skills, builds connections, and comes back smarter (hopefully).
So, by all means, keep some cash for a rainy day. But if you want to thrive in the long run, give your money a job. Put it to work in the markets. Because unlike that mattress of yours, the stock market has a long history of paying rent.
If you need or want to talk to me, feel free to get in touch.
Until next time…