Maximising the value of your cash

You may remember cash. Before the crisis, it was something that we used in shops. We had to make a trip to the cash machine to get it, and it always seemed to run out just when we wanted it.

But although most shops now prefer cards, cash, or at least its electronic equivalent still has its uses.

Cash is the most essential financial asset that is required by everyone.

At Continuum, we work with market leading cash management tools, to manage your cash in the most effective way and to maximise it’s value.

Cash and your investment portfolio

In investment terms cash is wealth not invested in stocks or other assets but held as cash in an account.

It wasn’t that long ago when you could select a money market account or a similar arrangement, and collect 4%, 5%, or even 6% on your money. You could collect substantial dividends and interest as a reward for providing liquidity to financial institutions.

Things have of course changed. In the current climate, interest rates are so low, most savings accounts struggle to keep up with inflation, making returns on cash effectively 0% or even negative in real terms.  Keeping wealth as cash may seem a strange way to go investing.

If cash is earning effectively no interest, you might be tempted to throw it all into blue chip stocks, indexed funds, or other securities so it will at least bring in something rather than nothing.

But – while it might not provide the returns it once did – there are still some sound reasons to make cash part of your investment plans.

Though assets kept in cash typically do not earn as much as other investments, their ease and convenience are a big help in emergencies – whether it is replacing your income or seizing an opportunity.

Your emergency fund

Keep sufficient cash to cover emergencies. For most people, it is sensible to have an emergency fund that could cover typical expenses for least six months if you have steady, reliable income from employment. Emergency funds allow you to get through unexpected disasters without having to sell off your assets. Being forced to sell assets at the wrong time can mean losses and even tax problems, which are particularly unwelcome if you are already  struggling financially.

So how do you invest in in cash?

There is no need to stuff notes into your mattress. There are several ways to use cash that actually makes it behave like an investment, while leaving it in liquid and easily accessible form.

Cash ISAs: let you save up to £20,000 annually. Any gains you make from the interest you’re paid are tax-free.  They have become unfashionable as low interest rates and the introduction of the savings allowance mean that their tax-free status is no real advantage in practice. However, once you have an ISA around your cash, you can transfer it to a more rewarding ISA when an opportunity arises, and still enjoy the tax-free benefit.

A Cash ISA lets you protect your savings from the taxman, and lets you invest them when the time is right – still tax free – in a more rewarding ISA such as one invested in stocks and shares.

Savings accounts: Once you have used up your ISA allowance, you can put your money in a taxable savings account. Instant or easy-access accounts suit those who may need to withdraw money at short notice. They are suitable accounts for rainy day funds but don’t offer much growth above inflation (if any). Higher rates of interest are often offered to savers when they open a new account. These bonus rates commonly last for 6-12 months, reverting to a lower rate thereafter, so it is worth making regular checks to confirm the rate you will receive and shifting into a better payer.

What can we do to help?

Maximising the value of your cash, should be a core aspect of your financial plans.

Using our market leading technology, we can assess the market to find the best value you can receive from your cash deposits. We then generate your cash report which will provide you with a bespoke report specific to your requirements.

You need an investment strategy to align your holdings of various assets with your investment goals.

At Continuum we can help you work out the right proportion of cash and other assets to hold, and help you find the best places to keep your cash working hard for you.

To make the most of cash investment you need an expert investment strategy. Call to book a video consultation with a Continuum adviser.

The information contained in this article is based on the opinion of Continuum and does not constitute financial advice or a recommendation to suitable Protection products or investment strategy, you should seek independent financial advice before embarking on any course of action.

The Financial Conduct Authority does not regulate deposit accounts.