Savers could be losing thousands of pounds by keeping money in low or zero-interest accounts, according to investment firm Quilter. A £10,000 nest egg left effectively "under the mattress" since the end of 2010 would now have the spending power of only around £6,300 after taking inflation into account.
Had the same sum been invested in global shares, it would have grown to almost £25,000 in today's money. That amounts to a potential loss of £15,000 - and potentially much more based on the reduction in value of the £10,000 when it is left to wither due to inflation.
£303billion sitting in zero-interest accounts
Quilter says £303billion of household cash is currently sitting in accounts earning zero interest, according to Bank of England figures. That is 60% higher than at the start of the pandemic.
The firm warns that millions of people are effectively keeping money 'under the mattress' by allowing cash to languish in current or low-interest accounts rather than considering longer-term investments.
Research reveals advice gap
Research for Quilter found that 27% of Brits would rather hold cash savings than invest, while 11% keep some savings as physical cash at home. There is also a sizeable advice gap, with 38% of adults saying they do not consult anyone before making financial decisions.
Yet a quarter of people say they want to learn more about investing to build their confidence.
Jo Harris, chief customer and operations officer at Quilter, said cash had "long played an oversized role" in the financial psyche of consumers.
She said: "Cash, of course, plays an important role in our personal finances, but we wanted to bring the problem of excessive cash savings to life. The familiar image of cash being stuffed under a mattress for the future is not a suitable financial strategy, yet many consumers do just that by leaving money in low or no-interest savings accounts."
Investing comes with risks
The figures highlight the potentially huge difference between simply preserving cash and putting money to work over the long term. However, investing in shares comes with the risk of losses and is generally more suitable for money that is not needed in the short term. Savers should also keep an emergency fund in accessible cash.
