UK inflation, should I let my spare money sit in my bank account?

UK Inflation is predicted to reach 6% in April, and we have less than a month left to use up any remaining 2021-22 ISA (Individual Savings Account) allowance.

As an adult in the UK, you have an allowance of £20,000 which you can put into ISAs every year, however any unused portion can’t be brought forward. Interest generated on money held in all forms of ISAs is tax-free, but cash ISAs aren’t a good idea because their interest rates are much lower than inflation, for example, 1% fixed cash ISA vs 6% inflation, meaning the money you have sitting in your bank account is losing its value.

A stocks and shares ISA differs from a cash ISA in that you invest your money rather than receiving interest on it. If you invest in a company that produces a profit, the growth will be tax-free if you do it through an ISA. This can be a significant financial benefit, as money earned outside of an ISA is subject to dividend tax, as well as capital gains tax if you sell shares for a profit and will be added to your overall income tax liability.

You should only invest in a stocks and shares ISA if you have emergency cash savings that cover 3-6 months’ worth of living expenses. Also, companies go bankrupt, prices fall, and stock markets can be quickly startled by major world events, thus investing has the risk of losing money.

There is no absolute means to beat inflation through investing, but there are a few options that could help you out.

1. Investment platforms

Investment platforms are a less expensive solution for buying, selling, and managing investments. Freetrade, Investmate, Moneybox, and Vanguard are some of the providers. Expect better returns from investing options that carry a higher amount of risk but be prepared for larger falls because the investments will be more volatile.

2.  Diversify

This involves spreading your investments across various sorts of investments, sectors, and areas around the world. Investment funds, which can contain hundreds of holdings, are a simple and inexpensive method to diversify. So, if one investment underperforms, t won’t affect the rest of your portfolio.

3. Be calm

It’s frightening to see your investment value drop but selling out every time the market drops is the worst thing you can do. Market drops arise for a variety of circumstances, and panic selling when assets are at a low means you’ll have to bear the losses and miss out on any rise.

4. Drip-feed your cash

Drip-feeding is the optimal approach to invest your money in an unpredictable market. Let’s say you wish to put £200 into a company stock. If you do it as a lump sum, you risk investing before the stock value declines, causing your investment to lose money. However, if you invest £20 a month for 10 months, you may invest a little at a higher price and lose a little, but you’ll be able to buy more once the stock value has declined, and have a possibility of benefiting from the value rising again in the future.

If you have any spare cash before your ISA allowance runs out next month, several investment platforms will let you to pay in a lump sum now and then drip-feed it into your investments over the next few months. The funds will be held in an ISA, and you’ll dodge the risk of making large investments when markets are turbulent. It’s important to keep in mind that while your money is being held in a holding account, it won’t be earning interest.

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ben crampin


Ben’s been here pretty much since the get-go and, as such, has been instrumental in growing the business into what it is today.
He’s passionate about, in his words, ‘helping people and businesses that are just constantly being taken advantage of’ by providing affordable advice and support with an eye to ‘levelling the playing field’.
Ben looks forward to the day when automation will, once and for all, fumigate the fear and confusion caused by oppressive bureaucracy and strongly believes that ‘technology holds the solutions to the problems we’re trying to solve’.
Furthermore, he can see that technology will, in time, provide the scalability required to help a theoretically limitless number of SMEs survive and thrive against the odds.
Ben doesn’t think much of government agencies and he doesn’t suffer fools; two points that aren’t always mutually exclusive.