3 Popular Savings Myths… BUSTED

This week is UK Savings Week, and the message is crystal clear: saving regularly is a smart strategy.

A solid cash buffer protects you against emergencies and allows you to have peace of mind that you’d not going to need expensive loans or credit cards and get into debt to pay for life’s challenges.

But is saving always the ‘safest’, most sensible option?

Here are some of the myths around saving that we think it’s worth getting to grips with:

“Saving is always a safe option”

On the surface, this seems true. The value of your cash savings doesn’t swing up and down like the stock market does, and your capital is protected – up to £85,000 per institution under the Financial Services Compensation Scheme (FSCS).

But savings aren’t risk-free, because if you’re not actively seeking out competitive interest rates, you face the risk of being outpaced by inflation. And if your money is parked in an account that isn’t at least keeping pace with inflation, then it’s losing purchasing power.

It might look, on the surface, as though the amount in your account is still rising, but in real terms, it’s falling.

Here’s an example: An average-sized UK savings pot, at 2025 figures, contains £16,000. Now let’s say your bank is paying 3% interest on your £16,000, but inflation is running at 5%. You end up losing £1,537.27 in purchasing power over 5 years. Over 20 years, that’s a loss in real terms of £5,318.27.

And with inflation having been as high as 11.1% in recent years (in October 2022), it’s not just a hypothetical risk.

“You can’t save too much money”

Saving is sensible. But saving too much puts you in danger of missing out on opportunities with higher growth potential.
Us Brits have been slow to embrace the stock market with just 33% of UK adults reporting they are investors compared to well over half of Americans. That may have been to our detriment, because the stock market consistently outperforms cash savings. Historical data shows that even cautious investors typically see far greater real returns than savers over time horizons of five years or more.

If you invest for longer-term goals (five years or more), you don’t need to be as concerned about market fluctuations as somebody who is only in it for the short-term. That’s because diversified markets generally go on to recover given enough time. For example, despite the 2008 financial crisis causing the FTSE 100 to fall by over 30% in a year, it regained those losses again within about five years. It is, of course, important to be aware that past performance is never a guarantee of future results, however.

“Investing is much more risky”

The assumption that investing is more risky than saving is oversimplified and misleading. ​

Investing encompasses a wide range of options with varying levels of risk – and it’s not all about being able to pick the next ‘hot stock’. Low-risk Money Market Funds, for example, aim to provide stability and capital preservation, often with returns that outperform standard savings accounts. And you can leave the stock picking to the professionals who run the fund. The best UK Stocks and Shares ISAs providers will offer ‘ready-made portfolios’, often allocated different risk ratings from low to high, specifically designed for those who don’t feel qualified to make complex investment decisions themselves.

So, while all investing does involve some level of risk, if you follow basic principles such as diversifying your portfolio (not putting all your eggs in one basket), you may be able to invest in a way that provides a reassuring balance between safety and growth.