Keeping some cash aside for unforeseen emergencies is essential but holding too much can hold you back. Here’s how to get the balance right and make sure your money is working harder for your future.

Many of us keep more cash in the bank than we need. It feels safe, it’s familiar and it’s always there if something unexpected happens. But once you’ve set aside a sensible buff er, leaving the rest sitting in a savings account can mean your money is losing value when you take into account the impact of inflation.

With the annual Cash ISA allowance set to fall to £12,000 for the under-65s from April 2027, now is a great time to review your approach.

Start with a solid emergency fund

You should start by making sure you’ve enough put a side for life’s surprises. Most people aim for somewhere between three- and six-months of essential expenses. This gives you confidence that you could handle a broken boiler, a sudden car repair or a change in circumstances without having to borrow.

An emergency fund is like a safety net. Once it’s in place, the rest of your money can be used towards your longer term financial goals.

Think about the cash you don’t need day to day

Many people find they still hold large sums in easy-access accounts beyond their emergency fund. Sometimes it’s because they’re not sure what else to do with it. But this is where inflation can quietly erode the spending power of your money. If prices are rising faster than the interest you’re earning, the real value of your savings falls.

Combine cash with longer-term investing

Money you won’t need for several years could be doing more for you. Investing gives your savings the chance to grow further, helping you outpace inflation and build long-term wealth.

Investing doesn’t mean taking unnecessary risks. It simply means matching the right type of investment to the right time frame. Cash for today and tomorrow, and investments for the years further ahead.

How a balanced approach might work for you

Imagine someone with £20,000 in the bank. They keep £6,000 aside as an emergency fund. The remaining £14,000
is money they won’t need for at least the next five years. If it stays in cash, it’s likely to lose spending power. But if invested, gradually and sensibly, it can support other financial objectives.

Why an adviser can help

Your adviser can help you strike the right balance, so your money stays accessible when you need it and has room to grow when you don’t.

 

Approved by The Openwork Partnership on 02/03/2026