New research reveals a significant opportunity gap in UK personal finance, with millions potentially missing out on wealth-building opportunities by keeping savings in cash rather than investments.
According to a May 2025 Financial Conduct Authority survey, 61% of people with over £10,000 in investible assets hold at least three-quarters of that money in cash rather than investment vehicles. Meanwhile, the gender investment gap shows concerning trends, with only 20% of women aged 18-34 investing compared to 41% of men in the same age group.
Mastering the Fundamentals of Investing
Financial expert Nisha Prakash, a lecturer in Financial Management at the University of East London, emphasizes that successful investing begins with clear objectives. "Before you start investing, you need to have a general idea of why you're doing it with clear financial goals," Prakash explains.
These goals could include purchasing property, funding education, saving for weddings, or planning for retirement. Establishing your timeline and targets helps determine appropriate financial instruments based on your required risk-return balance.
Practical Steps to Start Your Investment Journey
Understanding your personal risk tolerance represents a crucial first step. "How much volatility can you handle?" Prakash asks prospective investors. She notes that many beginners don't realize investing exists on a spectrum with various approaches to growing money.
For those with lower risk tolerance, fixed-rate ISAs offer guaranteed tax-free interest in exchange for locking money away for set periods, typically one to five years. These accounts often provide higher interest rates but restrict access during the fixed term.
Alternatively, easy access savings accounts provide flexibility with penalty-free withdrawals. Current top-performing options include Cahoot's Sunny Day Saver at 5.00% AER variable for balances up to £3,000 and Skipton Building Society's Quadruple Access Cash ISA Saver at 3.90% tax-free.
Building Financial Resilience Through Smart Habits
Prakash strongly emphasizes establishing an emergency fund covering six months of living expenses rather than the commonly recommended three months. This financial buffer protects against unexpected costs or income loss without forcing you to liquidate investments.
The expert also recommends the 50/30/20 budgeting rule as a proven method for managing finances: allocating 50% of income to needs, 30% to wants, and 20% to savings or debt repayment. This approach systematically builds both emergency funds and investment capital.
Education forms another critical component. "Complicated products don't necessarily translate to better returns in the long term," Prakash notes, echoing Warren Buffett's advice to never invest in businesses you cannot understand. Resources like Money Saving Expert and Trading 212's Investing 101 provide excellent starting points for financial education.
Finally, Prakash suggests checking credit reports regularly and considering consultation with certified financial planners for personalized guidance. "They'll help you build a personalised plan and explain any queries or worries you may have," she assures beginners taking their first steps toward financial growth.
