Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
The rewards of investing in stocks and shares may outweigh any potential risks.
If you’ve been hoarding cash at home, inflation will do its best to devalue it, so it could be time to rethink your saving strategy.
We live in uncertain times – the COVID-19 pandemic and Russia-Ukraine conflict in Eastern Europe have affected supply chains, prices and, crucially, inflation – and this tends to make everyone tighten their belts and migrate to the safety of cash. However, simply keeping it under your mattress or in a savings account leaves it vulnerable to inflation.
Inflation measures how quickly the prices of everyday goods and services change. By the end of 2022, inflation was running at more than 10% in the UK.1 This meant that on average, the cost of food, fuel and even a simple haircut was considerably higher than it was at that time last year. If prices rise quickly and wages don’t keep up, you can’t afford to buy as much.
To combat inflation, central banks tend to raise interest rates because this discourages borrowing and spending. If people aren’t spending as much and demand for goods and services falls, suppliers drop their prices, which helps curb inflation, which is now at 3.5% in April 2025. The Bank of England’s current base rate sits at 4.25% in May 2025. But even the most generous high street bank will only offer you a savings rate of around 4% on an instant-access account.2 Accounting for rising prices (3.5% inflation)3 the returns would be modest so it could be worth investing instead.
It’s never too early to start investing because it’s time in the market that counts (rather than market timing). Savings tend to be for the short term, while investing is more suited for the long term—typically 5 to 10 years or more.
It’s a good idea to have a savings account for short-term goals, like a holiday, or for unexpected events, such as your car breaking down. A key benefit of a savings account is that you can access your money straight away when you need it.
A common rule of thumb is to keep 3 to 6 months’ worth of expenses in savings. This acts as a financial safety net in case of emergencies.
Investing, on the other hand, is better for building wealth over time and reaching long-term goals, like buying a home or retirement.
If you can afford to save a little each month, you could invest in your future by making a regular contribution via direct debit to a Stocks and Shares ISA.
A stocks and shares ISA in the UK offers tax-free investing. You won’t pay income tax on dividends or interest, nor capital gains tax on profits. Withdrawals are also tax-free. It’s ideal for long-term growth, offering flexibility to invest in shares, unit trusts, and investment trusts.
People are often wary of investing when the markets are volatile, but the low prices can make this a great time to buy for investors seeking higher returns.
There is strong evidence that investments deliver higher returns than cash, but investors must be prepared to lose money in the short term because markets can react to global events, recessions and conflicts. To get the most from your investments, it’s better to have a long-term strategy.
As investors gain knowledge and confidence in the markets, they might branch out from holding a diversified portfolio of UK and US companies to include more volatile sectors like emerging markets. There is still risk attached to any investment but, as investors become more experienced, they might be more comfortable taking a little more risk in the knowledge that they could see higher returns.
Risk: Emerging market investments are usually associated with higher investment risk than developed market investments. Therefore, the value of these investments may be unpredictable and subject to greater variation.
1,2 Source: Bank of England, 21 May 2025 & Bloomberg, 21 May 2025.
3 Source: Bloomberg, as of 21 May 2025.
