Everyone knows inflation erodes the value of money, so why do people keep holding cash?
In the UK, approximately £440bn is kept in Cash ISAs – that’s a tax free wrapper where £20k (being reduced to £12k now) can be kept in short term government deposits.
We’ve spoken about this at length previously in the presentation below…
And we even got Martin Lewis to FINALLY talk about the problem of Brits not taking enough risk…
The “Caution Tax”
The real cost of “safety” is staggering. If you put £10,000 into a top-tier Cash ISA in 2014, today you have roughly £11,500. Sounds okay, right? Wrong. Adjusted for inflation, that £11,500 buys you less than your original £10,000 did a decade ago. You didn’t save money. You stored a slow motion car crash.
Meanwhile, that same £10,000 in a global tracker would be worth over £30,000. That is a £18,500 “Caution Tax.” You paid nearly twenty grand just to feel “safe.” That is the price of the British Fear Factor.
And even over the last five years, if you had kept your money in the SP500 versus your Cash ISA because you wanted to be “safe”, here’s what that would look like…
Small Thinking vs. Big Logic
We are a nation obsessed with the visible. We like seeing the number in the bank app stay the same or go up by a few pennies. It feels controlled. It feels sensible. But the market doesn’t care about your feelings. The market only cares about growth.
While you were busy switching energy suppliers to save £40 a year, you were losing thousands by ignoring the greatest wealth creation machine in history. You were busy being a Nectar point hoarder while the S&P 500 was compounding.
The Messiah has Pivoted
At Fink, we look at the second order outcomes. Keeping cash isn’t “playing it safe.” It is a deliberate choice to opt out of global progress. It is a bet against Moore’s Law and tech innovation. Quite frankly, it is caveman vibes.
Martin Lewis has finally woken up to the reality that you cannot budget your way to freedom. The Messiah of the spreadsheet has pivoted. Now it is your turn.
Stop being a neurotic nancy about market dips. The only real risk is reaching retirement and realising your “safe” pile of cash can only buy you a bag of Freddos. Get started. Get invested. Stop losing.