Your money

Your cash savings could be losing their real value.

Here’s how to change that

In a nutshell


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


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


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


Inflation can reduce the buying power of your money, 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.

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Capital at risk. Tax treatment depends on your individual circumstances and may change in the future..

Find out about Nutmeg’s investments and what they could do for you.
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As with all investing, your capital is at risk. The value of your portfolio with Nutmeg can go down as well as up and you may get back less than you invest. A stocks and shares ISA may not be right for everyone and tax rules may change in the future. If you are unsure if an ISA is the right choice for you, please seek financial advice. Simulated past performance is not a reliable indicator of future performance.

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 it is fair to describe it as a ‘reasonable expectation over the long term’. 

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 purchasing power. 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 in time 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.

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