Over half (52%) of Brits believe cash savings are less risky than investing, yet two-thirds (66%) aren’t aware that money invested in the stock market grows more over the long-term than the interest on cash savings, according to new research from Alliance Witan.
When surveying those who do not currently invest, a quarter (24%) cited the risk of losing money as the biggest barrier. This is particularly true for people who have no intentions of investing (28%), compared to 23% of those who do still intend to start. The general risks associated with investing were also cited as the aspects that confused non-investors the most (27%).
While fears of the perceived risks with starting investing is a significant barrier for many, there is a lack of awareness of the risks of holding savings in cash accounts over the longer-term. Three in 10 (28%) Brits believe cash always holds its value over time, while a third (32%) are unsure if this is true, showing a general lack of understanding of the impact inflation has on the value of cash deposits.
18% of Brits believe that the interest rate on cash accounts always stays above the level of inflation, while 37% weren’t sure whether this is the case. Similarly, 18% believe that cash savings aren’t at risk from inflation, while 32% are unsure.
Awareness of the benefits of income investing is also worryingly low, as nearly half (46%) of Brits believe you only make money from an investment if the share price rises. The research shows a significant lack of awareness of the value which dividend-paying companies and funds can add to a portfolio, and how reinvesting dividends can bolster the effects of compounding.
Mark Atkinson, Managing Director, Willis Towers Watson, which manages Alliance Witan, comments: “While investing always carries a degree of risk, it remains the most effective way of building long-term wealth and preserving the real value of savings against the ravages of inflation. Our research suggests that many people either underestimate this benefit or place too much emphasis on short-term market fluctuations, leading them to favour cash holdings that may gradually lose purchasing power over time.
“If you’re thinking about taking your first steps into investing, it’s important to find a comfortable home for your money that aligns with your risk tolerance and time horizon. Resources like our Learning Zone are free and informative, highlighting the importance of diversifying your portfolio and taking a long-term perspective.” |
