As ‘safe’ cash reserves lose purchasing value, NatWest warns against ‘too much faith in cash.’
According to NATWEST research, the vast majority of parents and guardians who save or invest for their children do so only in cash, raising concerns about the impact of inflation.
Official statistics reveal that inflation in the UK has lately risen, with the Consumer Price Index (CPI) climbing to 2.1 percent in the 12 months to May 2021. Meanwhile, the Bank of England’s base rate has remained unchanged at 0.1 percent, a record low.
It has prompted cautions to savers about the potential impact of inflation on their hard-earned money.
It could also harm families seeking to save money for their children’s future.
According to new NatWest data, 76 percent of parents and guardians in the United Kingdom save or invest money for their children.
However, according to the survey, the vast majority (83 percent) do so solely in cash, implying that their money may not be rising in real terms.
“It’s encouraging to see how many people are saving and investing for their children, but with so much of this savings being cash, the concern is that the customer isn’t aware that the impact of inflation means the purchasing power of these ‘safe’ cash balances actually goes backwards over the longer term,” said Peter Flavel, CEO of Coutts & NatWest’s Wealth Businesses.
“We want to do our share in educating folks who want to stretch their dollars further.”
According to NatWest data, nearly one in five (18%) of UK parents or guardians are saving for their children by putting money into their personal account.
Meanwhile, 15% of the population invests in NS&I Premium Bonds or Children’s Bonds.
Less than one-quarter of UK parents or guardians (23%) use stocks and shares to save or invest for their children.
“We believe that at least half, if not two-thirds, of ISA balances should have been placed in competitively priced stock and shares ISAs,” Mr Flavel said, “but the persistent preference for cash implies that ISAs aren’t actually supporting the UK’s medium-term savings pool in the way they should be.”
Unsurprisingly, the most common reason for parents not saving for their children is financial constraints.
“Brinkwire Summary News” explains why 48% of people who aren’t investing for their child aren’t.