Fear and distrust of the stock market is driving Brits to keep all or most of their wealth in cash, despite knowing inflation will erode its value, new research from Scottish Friendly has shown.
According to the findings, 42% of British adults keep all their wealth in cash and 15% hold most in cash, even though nearly three quarters (72%) recognise that doing so could make them poorer over time.
The ability to access money quickly was cited as the main driver for holding cash (39%), followed by fear of making losses (38%) and a lack of trust in markets (34%). Concern about losses was especially strong among women (44% versus 33% of men), while men were more likely to say they distrusted markets (35% versus 33% of women).
Scottish Friendly said the findings highlight the challenge the Government faces in encouraging more people to invest.
The study also highlighted a significant generational gap, with 54% of Gen Z stating they need quick access to their cash, significantly ahead of Baby Boomers (41%), Gen X (39%) and millennials (35%).
However, Baby Boomers (40%) were considerably more likely to say they distrusted markets than Gen X (33%), Millennials (24%) and Gen Z (23%).
Baby Boomers (44%) were also more likely to say they couldn’t afford to lose money than Gen X (41%), Millennials (26%) and Gen Z (15%).
Kevin Brown, savings specialist at Scottish Friendly, said: “This data shows the extent of the mental gymnastics that millions of British adults tie themselves up in. People in the main understand the risks of keeping their savings in cash over the long term but they nonetheless cannot make the leap to invest. The result is they are making themselves poorer.
“The reluctance to invest isn’t just caution; it reflects deep-rooted fear of losing money, particularly among older generations, who are most likely to avoid stocks and shares entirely.
“This also affects the economy, leaving domestic companies short of the capital they need to grow.”
Brown said the industry must do more to educate people and provide practical guidance to show that investing can provide greater potential in the long term and prevent people’s wealth from eroding in value over time.
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