Why Should You Bother To Invest?

Often when I speak to people about investing, they see it as a middle-aged pursuit of reading the share prices in the paper and talking endlessly about portfolios. Based on this perception, it is easy to see how this can be seen as a dull pursuit that can be dealt with at some point in later life. However, I recently also spoke to a colleague who was ‘saving’ any spare cash he had, not for a specific reason but because he did not know what to do with it. He had £50K in cash, increasing by £1000 per month.

This is not to say that all cash is bad. There is a ‘cash is trash’ army out there that will try and convince you otherwise. But it is always good to have an emergency fund in case of emergencies. Pre-pandemic standard thinking was 3–6 months (depending on employment status) to cover essential household spending if you could not work. Post pandemic, some experts suggest you should have up to 12 months of available cash.

So after you have the cover for unforeseen circumstances, isn’t investing, stock markets and other investments all a bit risky? Any action has its benefits and potential risks, and the key risk to keeping everything in cash is inflation. Keeping money in cash is relatively safe up to a certain amount and easily accessible if you need it, but you need to understand what inflation is doing to your cash savings.

Let’s look at an example:

If you have £1000 in savings and do not add anything to it. If your bank is offering you a 0.4% return and inflation is at 5.4%…