Is cash king?
Peter McGahan
Monday 3rd August, 2026.
CASH is one of the great comforts of financial life. It sits there, doesn’t shout, doesn’t fall 20 per cent in a bad month, and is available when the boiler decides to retire before you do. There is real emotional value in that, and anyone who dismisses cash as dull has probably never had a brown envelope arrive with a car repair bill.
Comfort is not the same as strategy though.
The job of investing is not to beat your neighbour or outsmart the City slickers. It is simpler. It is to make sure your future self can afford life.
That means three things. First, your money must try to preserve its buying power against inflation. Second, it must grow enough to give future-you options: retirement, children, a house move, care, helping family, or just not having to panic. Third, it must turn the ugly short-term lumpiness of markets into a smoother long-term path by being diversified and left alone long enough to work.
Cash can only do some of that. It can protect you from short-term shocks. It can stop an emergency becoming debt. It can give you the psychological benefit of knowing you can cope if life spills coffee over your plans. That is what an emergency fund is for.
The mistake is using emergency-fund logic for 20-year money.
Inflation is the quiet risk because it rarely feels dramatic. If £10,000 sits in an account paying two per cent for 10 years, the statement may show around £12,190. Fine. Polite applause. But if prices rise by three per cent a year, that money is worth nearer £9,100 in today’s buying power. The number has gone up, but the usefulness has gone down. That is financial shrinkflation.
This is the difference between nominal and real. Nominal is the number on the screen. Real is what the number buys. The first makes you feel safe. The second tells you if you are.
We have had a blunt lesson since 2022. Inflation was not a classroom theory; it was the supermarket, energy bill, diesel pump, insurance renewal and pub menu all moving like they were on steroids. CPIH inflation was three per cent in May, 2.8 per cent in June, and 9.6 per cent in October 2022. A saver earning less than inflation is not standing still. They are moving backwards.
The national picture is odd. The financial regulator found one in 10 people had no cash savings at all, while another 21 per cent had less than £1,000 for emergencies. At the same time, 61 per cent of people with more than £10,000 in investible assets held at least three-quarters of it in cash.
For those with no buffer, the priority is not investing. It is resilience. Build cash first. Pay down expensive debt. Avoid being forced to sell investments at exactly the wrong moment because the washing machine has decided it’s not that bothered about working anymore.
For those with years ahead and large cash balances, the question changes. What is this money for? If it is needed in the next year or two, cash is usually sensible. If it is for 10, 20 or 30 years’ time, cash may be the riskier choice. Not because the balance will crash, but because it may never have a chance to grow.
This is where ISAs and pensions are often misunderstood. Their job is to move money from cash thinking into future-self thinking. A cash ISA for short-term needs can be sensible. A cash ISA for retirement in 25 years may keep the tax break while wasting the engine.
Investing is not magic. Values fall. Bad years happen. Diversification does not remove risk; it spreads it. Charges matter. Tax matters. Behaviour matters most of all. The investor who jumps in and out depending on headlines is not investing; they are providing liquidity to people with calmer blood pressure and those moving the markets.
So, start with foundations, not products. What is the money for? When is it needed? How much short-term safety does that purpose genuinely need? What return is required after inflation? Think cash is the pantry, investments as a fridge and pensions as the freezer.
Cash protects you from volatility today. Investing, used properly, protects you from regret later.
The better question is not “is investing too risky?” It is: “what risks am I taking if I never invest?” For long-term money, the answer may be the most expensive silence in the future you.
I will be creating a guide to investing, so, if you would like a complimentary copy, please email info@wwfp.net.
Peter McGahan is the Chief Executive Officer of Independent Financial Adviser firm, Worldwide Financial Planning. Worldwide Financial Planning is authorised and regulated by the Financial Conduct Authority.
