Cash: Investment Guide

Want to understand more about investing in cash?


Cash investments come in many forms and are generally considered among the safest types of investment. They tend to be quick to access and are therefore ideal in the event of a financial emergency. However, the prospect of high interest returns is often not as great as with other forms of investment. 

Individual savings accounts, commonly referred to as ISAs, are a form of cash investment and represent a tax-efficient way to either invest or save. This is because, unlike with a regular savings account, the interest accrued is not subject to income tax, meaning you get to keep all of the interest you earn. There are various types of ISAs available, including cash, junior and stocks and shares ISAs. 

Fixed term deposits are provided by banks and offer investors a higher rate of interest - until the given maturity date - compared to a regular savings account. They tend to be short-term, with maturities lasting anywhere from a month to a number of years. After a deposit is made, the investor can only withdraw the money once the fixed term is up. 

National Savings and Investments, otherwise known as NS&I, is a government agency that offers investment and savings products to the public, including premium bonds, direct saver accounts and direct ISAs. Investing with NS&I means you are lending to the government and, as such, your money is totally secure.   


The above investments are all considered low risk, and so the likelihood of losing significant sums is also low. Investments of this type are safe, simple and easy to run, and do not require constant reviews and updates. 

While representing a form of investment, cash options also facilitate saving, meaning that the money you put into your accounts is likely to grow - although not necessarily at great speed - rather than run the risk of diminishing. 

There is also a lot of choice when it comes to cash investments, allowing you to choose a product that suits you. While one person might benefit from an instant access account, for example, another may be better suited to a fixed rate option. 

Cash investments also provide a degree of security for your assets. Investing in a bank, for example, is seen as a highly safe option, despite the events of the recent financial crisis. If the worst happens and your bank does go bust, there are certain safeguards in place to make sure you do not lose all of your assets. Should this occur, and either your bank, building society or credit union collapses, you would be entitled to claim compensation through the Financial Services Compensation Scheme (FSCS). 

The FSCS can provide compensation for up to £75,000 of lost money per person. This is only applicable if the institution in question is covered by the Financial Conduct Authority or the Prudential Regulation Authority - however, most banks and similar institutions in the UK should fall into this category. 


Because cash investments are typically low risk, they generally offer low returns in comparison to other forms of investment that have the potential for much greater returns, much quicker. You are unlikely to 'get rich quick', in other words. 

Cash returns can often be below inflation, which means that, in real terms, there is always a risk that cash investments could result in money being lost. 

It can also be a little tricky to transfer funds, especially if moving from one provider to another, as this can be complicated and time-consuming.


As mentioned, cash investments are predominantly low risk investments that are safe and secure, but do not promise the same level of returns as other options. These types of savings are also impacted by inflation. This means that your invested money will need to increase by at least the rate of inflation, as your money will be losing value in real terms if this is not the case.  


Cash investments are suited to most people because they also provide an opportunity to save. They are a safe option for those looking to protect their assets. Cash will also likely be required by many people as an emergency fund, when they need to access money quickly and easily, such as for emergency house repairs. 

However, more serious investors willing to take more risks in the hope of maximising potential returns may find other forms of investment are better suited to their needs. 

The information provided is based upon the opinion of Equilibrium and does not constitute advice. Investments can fall as well as rise.