Here's something I think about a lot: banks make a lot of money from customer deposits, and savers get very little in return.
Here's how it works (in my understanding). You deposit cash into a savings account. The bank pays you interest — currently that tends to be quite low. Then the bank lends that money out at considerably higher rates — credit cards, mortgages, personal loans, business loans. They pocket the difference.
That difference — the spread between what they pay depositors and what they charge borrowers — is a big part of how banks make their profits. That's just how banking works. I'm not saying it's right or wrong — I'm saying it's worth understanding.
There's also inflation to consider. If prices rise faster than your savings earn interest, the purchasing power of your cash shrinks over time. That's not a prediction — it's just maths. Whether this matters to you depends on your own situation.
I'm not saying banks are bad. Current accounts are essential for day-to-day money management. And keeping emergency savings in cash is something many people choose to do — including me. But for me personally, I decided that cash savings beyond my emergency fund weren't doing enough work.
So here's what I did — and this is purely what I did, not a suggestion for you. I moved money I didn't expect to need for the long term into broad-market ETFs held inside a Stocks & Shares ISA. My thinking was: rather than my cash earning very little interest at the bank, I'd rather own tiny slices of thousands of real companies. But this carries risk — share values can fall, and I could get back less than I put in.
Over long periods, global stock markets have historically delivered average annual returns higher than savings accounts. But — and this is crucial — there are no guarantees. Markets go down as well as up, sometimes sharply. Past returns don't predict the future. What I did might not be right for you at all.
The point of this post isn't to tell you what to do. It's to explain why I personally decided to invest rather than save. Your circumstances, goals, and risk tolerance are different from mine. You might need that money sooner. You might not want to take any investment risk. Both are completely valid choices.
What I do keep in cash: an emergency fund covering several months of expenses in an easy-access account. That gives me peace of mind. What I do beyond that is my personal choice based on my situation — and yours should be based on yours.