Your money

Your cash savings could make you poorer.

Here’s how to change that

In a nutshell

01

“Savings” and “investments” might seem similar but in fact they’re very different and hard to compare.

02

"Savings" grow in line with current interest rates - which have been very low for years.

03

“Investments” grow through increases in the underlying asset prices and the reinvestment of dividends.

04

Inflation can reduce the buying power of savings, making investments a better choice if you’re okay with risk. 

Please note, the information presented in this page is for illustrative purposes only and does not constitute tax advice or recommendations.

Find out about Nutmeg’s investments and what they could do for you.
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With investment, your capital is at risk. Tax treatments apply.

Find out about Nutmeg’s investments and what they could do for you.
Explore now

With investment, your capital is at risk. Tax treatments apply.

In more detail

How can your cash savings be losing value? It all comes down to the difference between savings and investments.

Negative real interest rates, where the interest rate is lower than inflation, have been with us for much of the last decade. So if you have been a cash saver since 2010 then you are likely to have seen the real value of your cash fall as inflation has outpaced interest rates. It is impossible to predict the future, however few predict a significant rise in interest rates in the near future. 

But investing opens up the possibility of growth that actually outpaces inflation, and gains real value over time. It is not guaranteed to do this of course – nothing is guaranteed in the world of investments – but our legal team say we can describe it as a ‘reasonable expectation over the long term’. 

In the end this encapsulates what investing is all about, accepting the level of risk that is appropriate for your circumstances in order to try and reach your financial goals. Avoiding all risk means limiting the possibility of growth, and in periods of ultra-low interest rates, such as the current one, it means seeing your cash savings reduce in value. It's all about striking the right balance.

The point to remember is that even a modest investment, with modest growth projection, can grow to become something quite substantial thanks to the effect of compounding (watch our video below!). Sticking your money under a metaphorical mattress might feel reassuring but it may not grow your wealth to meet your financial objectives. At the very least, do the maths and consider the risk vs reward equation.

Compound returns, "the 8th wonder of the world"

That's how the great Albert Einstein described compound returns, and who are we to argue? This short video explains why it's so powerful.

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