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Mark Sekree Posted:
243 days ago (January 26th 2017)

I Hate Cash!

 

Academically I know there are reasons to hold it- total security (under £75k with each institution) and liquidity- but I just hate it. Here’s why:

Banks Make Lots of Money on Your Money, You Don’t

At the moment, for a simple example, you might deposit £100k with a bank. They might pay you 0.1% interest, maybe as much as 0.5%pa if you’re lucky. At the same time they don’t just use this money to lend out at, say, 2% interest and keep the 1.9% difference. They ‘multiply up’ the amount they can lend based on your deposit and make many times that. Barely any of this money goes to you- it goes to running vast corporations, paying massive bonuses and returns to shareholders.

They have a license to print money. At the same time they have brought the world to the brink of ruin, plunged public finances around the world into a mess and have merrily bounced back to making record profits.

I don’t want my money to be any part of that.

The Total Security is Provided by the Government/Taxpayer, Not the Bank

Depositing your money with banks is actually a bit risky. If the bank goes bust then you should lose your money. This should give the bank an incentive to be careful with your money so that they attract deposits. As things are they can be as risky as they like (as long as they get licensed) and still attract savers because of the Financial Services Compensation Scheme which guarantees deposits up to £75k. This just strikes me as a totally unfair subsidy to incredibly profitable institutions.

You Can Get Higher Rates

But it either involves locking your money away (so negating one of the reasons to hold cash in the first place) or complicated routines with current accounts. I keep considering the complicated routines (MoneySavingExpert is excellent for this info) but can’t bring myself to do it. I tot-up that it might be worth a few hundred pounds a year to do it but it’s hassle I don’t need and it would still be supporting the banks.

You Have No Chance of Keeping up with Inflation

At these rates you are losing money next to the rising cost of living each year. Guaranteed.

Fair enough, everything but cash will go up and down in value over time and you stand a chance of getting back less than you originally invest, but at least this gives you a shot at keeping up with inflation.

Cash ‘Burns a Hole in Your Pocket’

I’m not sure why but I, and most people, are far happier to spend cash savings than even totally liquid investments. Maybe it’s just the feeling that cash isn’t doing anything at all these days whereas investments have a purpose, but whatever the reason it does seem to be the case. If I want my savings to be there for the medium to long term I don’t want to be tempted out of them.

The EZ ISA Alternative

Here the money is invested directly into companies around the world- when they make profits (as they tend to) you are directly rewarded. Like cash the money is almost totally liquid (it takes about 10 days to withdraw) and costs nothing to invest or withdraw. While the Lower Risk (‘Conservative’) Fund has dropped in value occasionally (as you would expect from any legitimate investment) it has returned over 20% over the last five years, easily outpacing cash and inflation. The higher risk funds have performed significantly better.

It takes less time to set up than a new savings account and no time at all to run. While the investments will track up and down in value your money is secure as EZ ISA and all the organisations we use are fully FCA regulated.

Click here to set up an account online in minutes.

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