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Why don't smaller savers invest their money?

October 2021

Teddy Nyahasha, CEO

With interest rates on cash balances at an all-time low and inflation rising, why is it that the majority of the UK population still holds its savings in accounts that are devaluing their balances by the day? It’s the modern equivalent of keeping money stashed under the mattress.

According to June’s HMRC report – Commentary for Annual Savings Statistics – the share of ISA accounts subscribed to in cash is steadfastly sticking at 75%. Yet stocks and shares-based ISAs make up around half of the market value – which suggests that those with larger balances are happier to invest in the stock market.

So, what of the smaller savers? The 75% whose money is devaluing. Why don’t they invest? I believe that confidence and financial inclusion are at the heart of the issue here.  Not everyone can afford the minimum lump sum opening balances of around £1,000 that some providers require, or the regular monthly payments that are often in excess of £100. These minimum sums are a barrier to investment for the less well-off and for those working in the gig-economy whose monthly income may fluctuate. So, no wonder they’re sticking with cash accounts which don’t require a commitment to these high monthly saving requirements.

Last year OneFamily undertook some research where we looked at the next generation of savers – we spoke to 1,000 teens to see what their attitudes to savings were. 84% said that they thought that it was important to save money, but only 36% felt confident in investing and 55% said they didn’t understand what stocks and shares are.

To the inexperienced investor the myriad of funds must look like a minefield – where on earth do you start if you can’t afford a wealth adviser? Add to that the complex charging structure for some of these accounts with platform charges and separate fund fees and the barriers to investment are just getting higher and higher. 

But it hasn’t always been this way. Financial inclusion was something that the child trust funds actually did very well. 6.3m accounts were set up as a long-term tax-free savings vehicle for all children born between 1 September 2002 and 2 January 2011 and only 17% were invested in cash. Around a quarter of these accounts were automatically set up by HMRC, because parents or carers had not claimed their child’s voucher. As a result, many have not had any additional deposits added and the balances can be quite small. However, the majority of funds that were invested in stocks and shares have continued to grow in value and have outstripped their cash counterparts - despite the recent ups and downs of the stock market. 

Although not perfect, perhaps the child trust fund concept was onto something, by opening up investment to literally everyone. 

So rather than asking why smaller savers are putting their money under a digital mattress, maybe we can answer the question by designing simpler products that don’t have hefty financial barriers to investment.

In other words, perhaps we can be more financially inclusive.


Teddy is a strong supporter of diversity, inclusion and equality. A passionate believer in social mobility and financial inclusion; he is using his position as CEO of OneFamily to help the young, the disadvantaged and the marginalised to reach beyond their expectations. His view is that everyone in society should have the same opportunities to access financial products – regardless of their wealth.

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