
Turning savings into smart investments
12 October marked National Savings Day, an annual reminder to take stock of our financial habits, this year with interest rates easing and inflation still nibbling at returns, it’s also a call to go beyond saving and start investing. Today, the savviest savers aren’t just stashing cash for a rainy day, they’re putting their money to work to meet long-term goals such as retirement, property purchases, or building generational wealth.
From saving to investing
After two years of monetary tightening, the Bank of England began cutting its base rate in 2025, bringing it down to 4.0%. While that’s good news for borrowers, it means the era of 5%-plus savings accounts is fading.
Top one-year fixed-rate bonds are now paying around 4.4% and easy-access accounts even less. These returns look decent on paper but with inflation still hovering near 3.6%, the real growth of cash savings is slim.
That’s where investing becomes key. Once your short-term needs are covered, moving excess cash into diversified investments offers the potential to outpace inflation and build genuine long-term wealth.
Why investing matters more than ever
- Inflation erosion: Cash savings lose value over time if interest lags behind inflation.
- Longevity risk: With life expectancy still in the mid-80s, retirement pots need to last longer and grow faster.
- Compounding: Reinvested returns create exponential growth over decades, not just years.
- Access to global opportunities: From green energy to AI, investors can tap into structural growth trends that cash can’t match.
In short, saving protects your present. Investing protects your future.
Different investment routes for different goals
1. Stocks & Shares ISAs
Tax-efficient and flexible, Stocks & Shares ISAs remain a cornerstone for UK investors. You can invest up to £20,000 per tax year with all returns shielded from income and capital gains tax. From passive index trackers to actively-managed funds, ISAs allow exposure to global markets while keeping your tax bill low.
2. Pensions and Lifetime ISAs
If your goal is retirement, pensions remain unbeatable for long-term compounding. You benefit from tax relief on contributions, and many employers offer matching contributions. For younger savers, the Lifetime ISA (LISA) offers a 25% government bonus on up to £4,000 a year towards a first home or retirement.
Balancing risk and reward
The key to successful investing lies in diversification. Holding a mix of assets, from equities to bonds, across different geographies, helps smooth returns and manage volatility. A typical long-term investor might start with a 60/40 equity-to-bond mix, however, remember to adjust over time as goals approach or your objectives change. Regular rebalancing also ensures your portfolio stays aligned with your risk tolerance, not market noise.
The psychology of investing
Investing is as much about behaviour as it is about strategy. The most common mistakes: panic selling, overtrading, or chasing last year’s winners, for example, often do more harm than market downturns themselves.
Setting clear objectives, investing consistently (via monthly contributions), and focusing on the long term can help you ride out volatility and harness compounding effectively.
Remember: time in the market beats timing the market.
Learn more about the psychology of money in our free online course
National Savings Day may be about saving, but in 2025, the real opportunity lies in investing. Cash cushions are essential, but they’re just the starting point. Once your emergency fund is in place, every extra pound should have a purpose, growing, compounding, and building the future you want. Because saving is safe. But investing, done wisely, is empowering.
Five multi-asset funds
The Jupiter Merlin range has something to offer every investor. The Income fund aims to achieve a high and rising income with some potential for capital growth and is the least risky of the three that are Elite Rated by FundCalibre. The Balanced fund aims to have a balanced approach to risk while achieving capital and income growth and typically has more allocated to equities than the former. The most flexible and riskiest of the three is the Growth fund.
The Liontrust Sustainable Future Managed fund is a great option for those looking to put their money towards doing some good. The managers of the fund use a thematic approach to identify the key structural growth trends that will shape the global economy of the future. The fund aims to deliver long-term capital growth and has an excellent track record.
Those wanting the most flexibility from their fund may consider the IFSL Wise Multi-Asset Growth fund. The managers are afforded a significant degree of discretion over asset allocation and are allowed to invest up to 100% in equities. The fund can invest in both listed and private equity, commercial property and infrastructure funds, providing significant diversification in any portfolio.