Too Much Safety, Not Enough Growth
Most people know they should invest more, but they don’t, and the reason is rarely about money.
I wrote previously about the cost of remaining in cash (The real cost of leaving your cash in the bank), which showed that over the ten years to December 2025, the average deposit account turned £100 into just £122, while the cost of living rose to £159. A cautious investment portfolio, by contrast, reached £182 (and higher risk portfolios produced even higher returns). The gap is not small, and it is not theoretical. It is the real, measurable, cost of playing it safe with long-term savings.
And yet, the conversation I have most often with people is not ‘how should I invest?’ It is ‘I know I should, but I just haven’t got around to it.’ The data is there and the logic is clear, but the leap, somehow, never quite happens.
So, this article is not about the numbers. It is about why perfectly rational people, who have no problem understanding the numbers, still leave far too much of their money sitting in a current account for far too long.
The ‘just in case’ problem
If you ask most people why they keep a large cash balance, the answer usually comes back to some version of the same thing: “just in case.” Just in case the boiler goes (so you want to fix your own boiler). Just in case they lose their job. Just in case there is an unforeseen emergency – I had a client once that kept back cash just in case one of his children ended up getting arrested in a far-flung country and he needed to bail them out. Citing that whilst house insurance might cover emergency repairs to the roof there’s no policy for the actions of a hostile country.
This is entirely sensible up to a point. An emergency fund (typically three to six months of essential outgoings, held in accessible cash) is a cornerstone of good financial planning, and nobody should seriously dispute that. The problem is that ‘just in case’ has a habit of expanding. The three-month buffer becomes six months, then a year, then, I’d feel better with a bit more. Before long, a family might have £50,000 or more sitting in a savings account earning 4% (if they’re diligent in moving money around, but often less than 2%), while decades of potential investment growth quietly go unclaimed.
The emergency fund has become a comfort blanket, and that is a very different thing.
Loss aversion: why losses sting more than gains feel good
There is a well-established psychological phenomenon, first described by the behavioural economists Daniel Kahneman and Amos Tversky, called loss aversion. The core finding is that the pain of losing £100 feels roughly twice as bad as the joy of gaining £100. This asymmetry runs deep. It is not a quirk of personality. It is how most human brains are wired.
When applied to investing, loss aversion is almost perfectly designed to keep people on the sidelines. The possibility of seeing your portfolio fall 15% in a bad year registers as a vivid, concrete threat. The near certainty of your purchasing power eroding quietly in cash does not register in the same way at all, because you never see a number go down. Your savings account balance stays where it is. The fact that it buys less every year is invisible.
The risk of investing feels real. The risk of not investing feels like the absence of risk, but neither of those things is true.
The ‘I’ll do it when things settle down’ trap
There is another bias worth naming: what psychologists call the ‘present bias,’ or more colloquially, the tendency to treat inaction as a safe default. People tell themselves they will invest once the market looks less volatile, once the political situation clarifies, once interest rates settle, once their circumstances feel more stable.
The trouble is that things never fully settle down. There is always something that comes up, something that make it seem like a good reason to wait. Markets are always doing something alarming if you look at them closely enough. As the great Yoda said, “Always in motion is the future.” He was talking about the difficulty of seeing what has yet to happen. This applies to investing as well, while you can try to wait for the perfect moment, you have no way to know when the perfect moment might be. It might as well not exist.
Every year spent waiting is a year of compounding that never happens, and compounding, once lost, cannot be recovered.
Status quo bias: the pull of ‘how things are’
A fourth barrier is simpler and perhaps the most powerful of all. Changing something requires effort, and staying the same requires none. Behavioural economists call this the ‘status quo bias,’ and it shows up everywhere, from pension opt-ins to insurance renewals to the three-year-old direct debit for a gym nobody has visited.
For financial decisions, the stakes of inertia are higher than most people appreciate. The money sitting in a current account is not doing nothing; it is actively falling behind. But because the default state feels neutral, people remain in it — the status quo is not neutral, it just feels that way.
What good cash management actually looks like
None of this is an argument for recklessness. Cash serves a genuine and important purpose, and the question is not whether to hold any, but how much is truly needed and what should happen to the rest.
A practical framework might look something like this:
Firstly, identify your genuine emergency fund (three to six months of core outgoings in easy-access savings).
Then, set aside any cash that has a specific near-term purpose (saving for a house deposit, school fees due within a few years, a planned major purchase).
Third, everything else with a horizon of five or more years deserves serious consideration as potential investment capital.
That third category is where a lot of people’s ‘just in case’ money actually sits. And it is where the cost of doing nothing is the greatest.
Practical steps for getting off the fence
Knowing the biases is useful, but it does not automatically dissolve them. A few approaches tend to help.
Setting rules rather than making repeated decisions removes the temptation to delay indefinitely. If you decide that any cash above a fixed threshold (say, £15,000) will be reviewed quarterly for investment, you only have to make that decision once, and everything after that becomes mechanical.
Regular monthly contributions also sidestep the problem of trying to pick the right moment. Pound-cost averaging (investing a fixed amount each month regardless of market conditions) means you buy more units when prices are low and fewer when they are high. It is not glamorous, but it does remove the paralysis of timing and helps to get the investment ball rolling.
Finally, and perhaps most importantly: reframe what ‘safe’ means. Keeping money in cash feels safe. But if that money needs to support you in twenty years, and it has lost a third of its purchasing power by then, was it really the safe option? The answer, uncomfortable as it is, is no.
Working with a financial adviser is worth mentioning here specifically, because it addresses the present bias in a way that self-directed investing rarely can. One of the hardest things about making a financial decision alone is that there is nobody holding you to it. You can always put it off until next month, and next month nobody will ask why you didn’t act.
An adviser changes that dynamic entirely: there is someone to review progress, ask whether agreed actions have been taken, and gently push back when inertia has crept back in. That accountability is not about being told what to do; it is about having a structure that makes it harder to keep deferring. For many people, that alone is worth the conversation.
There is also a comfort dimension that should not be underestimated. For someone who finds investing genuinely anxiety-inducing, delegating the detail of what to hold and when to rebalance removes a significant source of friction. You are not abdicating responsibility for your money; you are placing the technical decisions with someone whose job it is to handle them, while retaining clarity about your goals. The worry that kept you in cash – what if I get it wrong? - becomes considerably smaller when the answer is ‘you are not doing this alone.’
A final thought
The psychological barriers to investing are not a sign of irrationality. They are entirely understandable responses to uncertainty, and they are shared by the vast majority of people, including those who know better. The goal is not to eliminate the anxiety of uncertainty, but to make sure it does not quietly cost you more than the thing you were trying to avoid.
Cash has a place. That place is just not as large as most people’s bank balances suggest.
This is for information only and does not constitute financial advice.
The value of your investments can down as well as up, so you could get back less than you invested. Past performance is not a reliable indicator of future performance.
Daniel Stansall is a financial adviser based in London.
After completing a Masters in astrophysics Daniel embarked on a ten-year career trading interest rate derivatives. He decided to retrain as a financial adviser in 2014 and achieved chartered status in 2019. Daniel has excellent technical knowledge and enjoys helping clients to understand their goals and helping them achieve their financial objectives. Daniel is a keen cyclist and an Arsenal fan.
daniel@mwafinancial.co.uk | LinkedIn