Chancellor Rachel Reeves has unveiled plans to encourage more people to invest their money, including the launch of an industry-led advertising campaign to highlight the benefits of investing.

There had been speculation that the chancellor would lower the annual savings limit for cash individual savings accounts (ISAs), but this did not happen.

Vanguard has long believed in the importance of investing in the stock market to achieve long-term goals such as retirement. While cash can be useful for emergency savings and short-term goals, holding too much cash could result in your money losing value over time, making it harder to reach your longer-term goals. Further on in this article, we show how £10,000 saved in cash in 2004 would be worth only £4,314 in “real” terms today.

Here are four reasons to consider investing your money.

Why should I invest my money?

1. Investing helps your money work harder

One of the primary reasons to invest is to make your money work harder for you. 

It’s always important to have sufficient cash savings to cover emergencies, such as unexpected bills or a period of unemployment. One rule of thumb is to keep three to six months’ worth of outgoings in a bank account.

Once you’ve funded your emergency pot, investing makes sense for most people, provided you’re investing for five or more years. Investing offers the potential for greater growth over time, helping you reach your goals faster. Although investments can go down as well as up, and you could get back less than you invest, history shows that shares have typically delivered better returns than cash over long periods. 

You can reduce risk by spreading your money across different types of investments, sectors and regions of the world.

2. Cash can lose value due to inflation

Cash, on the other hand, is more vulnerable to the effects of inflation, which can erode its purchasing power. Things usually get more expensive over time, which means the same amount of money will buy less in the future than it does today.

For example, goods and services costing £100 in December 2024 would have only cost £56 in 2004¹. In other words, prices have nearly doubled over the past 20 years.

By investing, you give your money the chance to keep pace with inflation and grow in value over time. The chart below shows that £10,000 saved in cash in 2004 would be worth only £4,314 in “real” terms today – that’s 57% less. The same amount invested in the global stock market would be worth £70,253 in today’s money – a 600% increase. 

Past performance isn’t a guarantee of future results, but it’s a compelling example of the power of investing. 

Shares can deliver significantly higher returns than cash over time

Past performance is not a reliable indicator of future results. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index. 

Notes: Cash returns represented by the UK Sterling Overnight Index Average benchmark (SONIA) and global shares by the FTSE All-World Index with dividends reinvested; and inflation by the UK Retail Price Index (RPI). SONIA reflects the average rate of interest banks pay to borrow overnight. 

Source: Factset, Vanguard calculations based on period 31 December 2003 to 31 December 2024.

3. Investing helps you build a more secure financial future

Investing can help you build a more secure financial future, especially when it comes to retirement. 

Your retirement may still be a long way off, but the earlier you start investing, the better. Starting early gives your money more time to grow, and even small, regular investments can add up to a significant amount over the years.

If you invest through a pension, you can take advantage of tax relief, which helps your money grow faster. For every £80 you save into your pension, the government adds £20, boosting your contribution to £100. If you’re a higher or additional-rate taxpayer, you can claim back an additional £20 or £25, respectively, via your self-assessment tax return.

4. Investing is easier than you may think

You don’t need to be a financial expert to start investing.

At Vanguard, we offer a range of services to help you get started. If you want a helping hand, we offer a managed service for those investing via our ISA or personal pension. We’ll select a portfolio of investments for you, based on your attitude to risk.

Alternatively, you can build your own portfolio from our range of over 85 low-cost funds. Or you can keep things simple with an all-in-one solution, such as our LifeStrategy funds or Target Retirement funds, which combine different types of investments in one ready-made portfolio. 

No matter which option you choose, the key is to start now and stay disciplined. Even a small investment today can make a big difference to your future.

¹ Source: Bank of England inflation calculator.

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Past performance is not a reliable indicator of future results.

The Vanguard LifeStrategy® Funds and Vanguard Target Retirement Funds may invest in Exchange Traded Fund (ETF) shares. ETF shares can be bought or sold only through a broker. Investing in ETFs entails stockbroker commission and a bid- offer spread which should be considered fully before investing.

For further information on risks please see the “Risk Factors” section of the prospectus on our website.

The eligibility to invest in either ISA or Junior ISA depends on individual circumstances and all tax rules may change in future.

Eligibility to invest in a Vanguard Personal Pension depends on your individual circumstances. Please be aware that pension and tax rules may change in the future and the value of investments can go down as well as up, so you might get back less than you invested. You cannot usually access your pension savings or make any withdrawals until the age of 55, rising to the age of 57 in 2028.

If you are not sure of the suitability or appropriateness of any investment, product or service you should consult an authorised financial adviser. Please note this may incur a charge.

Any tax reliefs referred to are those available under current legislation, which may change, and their availability and value will depend on your individual circumstances. If you have questions relating to your specific tax situation, please contact your tax adviser.

Important information

Vanguard only gives information on products and services and does not give investment advice based on individual circumstances. If you have any questions related to your investment decision or the suitability or appropriateness for you of the product[s] described, please contact your financial adviser.

This is designed for use by, and is directed only at persons resident in the UK.

The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information does not constitute legal, tax, or investment advice. You must not, therefore, rely on it when making any investment decisions.

Potential investors are urged to consult their professional advisers on the implications of making an investment in, holding or disposing of shares and /or units of, and the receipt of distribution from any investment.

Vanguard will manage your investments in the Managed ISA and Managed SIPP on your behalf. You will not be able to place trades on your own account.

The Authorised Corporate Director for Vanguard LifeStrategy Funds ICVC is Vanguard Investments UK, Limited. Vanguard Asset Management, Limited is a distributor of Vanguard LifeStrategy Funds ICVC.

For investors in UK domiciled funds, see our summary of investor rights and is available in English.

Issued by Vanguard Asset Management Limited, which is authorised and regulated in the UK by the Financial Conduct Authority.

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