Should You Use a Cash ISA?

Cash ISAs are the most popular among the range of Individual Savings Accounts. They hold more than £300 billion, growing at a rate of £30 billion a year, but most people are using them for the wrong reasons

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Timestamps:
00:00 - £280 Billion
00:39 - 69% of wealth
02:25 - Cash ISA popularity
03:14 - Nominal value
04:20 - Taxation
06:50 - When to use ISA instead of a savings account
08:05 - Savings problem
09:50 - Financial education
10:47 - Uses for a Cash ISA
11:01 - Inflation

[Patrick-mhml]

My only regret is that there was no ‘Damien’ helping make sense of personal finance when I was in my 20’s. The man has every right to be smug, yet retains a humility and a genuine desire to try and educate and help others, in an entertaining way too. This is the best of YouTube.

[IAmebAdger]

I see cash ISAs as somewhere to park your emergency savings if you are not able to fully use your ISA allowance on Stocks & Shares.

[mcgamer]

Currently 24 and for the past year I've learned a lot about finances and made big changes in my life for a long term improvement. I wasn't taught about finances at school, only when I moved out where I had started to struggle especially during covid where I had to become more savvy with my spending where I learned to appreciate every pound. Your videos has had a massive contribution to my financial goals and plans

[annapetrenko]

I’ve been consuming your videos in the last two weeks and can’t get enough of it. What makes your videos so appealing is that you’re not talking money only but you’re talking about the mindset and values.This makes the whole topic of money finally making sense to me.

[hdszfgrdm]

Spot on mate, I'm still fuming about my £2000 I put in cash in 1204. Worthless!

[jimipet]

My luck is such that as soon as I convert my cash ISAs to stock and shares ISAs, the markets will plummet.

[mxmus]

💯. I use cash isas as an easy access emergency savings fund. These accounts offer better rates than your current account, but I've never viewed them as an investment vehicle.

[disneyrm]

I genuinely can’t wait to start properly utilising a S&S ISA but, for now my Cash ISA is my ‘investment’ as the timeframe is only 3 years. I highlight the word ‘investment’ as the funds are for ‘investing’ in myself (my business) to level up, that will then enable me to be in a position to start a S&S ISA properly.

Keep up the good work Damien. Absolutely love your work.

[BaudBits]

Time frame is very important. If your savings/investment timeframe is five years or less then I would suggest that 5% ISA is a good safe bet.

[Loundsify]

Hi Damien, i think the main reason for cash isa popularity is mainly due to younger people saving for a deposit for a house and having a safe place for that money so it doesn't just disappear over night.

[Timmym]

The less you know the more likely you are to get burnt. I remember well to this day walking into Barclays with a grand in 1992, didn't know what to do with it, so I asked advice from the bank. They sorted me out with a nice investment which proceeded to lose over 60% of its value in short order, took more than a decade to get back to its original deposit amount. so I see why so many people don't trust banks when it comes to stocks and shares accounts, for a very long time I didn't after that experience.

You can get scared off quite easily by the warning that you may get back less than you put in as well.

I think what you don't mention here is a lot of ordinary people have a pension in some form, and so they do have some exposure to risk assets, and the cash isa is their savings not an investment.

[LeeThomas-]

For older people you should also add that if you keep your income or pension under 12.5k a year you can have up to 6k a year in interest from savings before paying tax. Then max out the premium bonds & ISA's. I retired a year ago aged 60 & plan to live the next 7 years without paying any tax on my income.

[wingtsun]

i only learned about investing a few years ago, I had been just leaving my money in the bank for 10 years.
If i'd invested it, i would have more than double what i have today.

[olliegarland]

Informative, well-written, well-produced and charismatic. This kind of content is so valuable to the masses.

[inderpalpanesar]

you come across super genuine mate, nice vid. subbed

[Travel_Day_Dreams]

The most important points you made, (i) most have nothing or very little saved, certainly much less than would be recommended as an emergency fund, anyone suggesting that this group should invest in S&S would be profoundly wrong. (ii) time horizons for many savers are between 12 months & 5 years, therefore the need for liquidity is primary and again suggesting investments in S&S would not be suitable. The only conclusion one can sensibly reach is that for all savers cash ISA's serve a very useful function & their flexibility as a tax shelter, & that they can be transferred to S&S whilst maintaining that tax shelter status, is a valuable benefit (which hopefully Rachel Reeves will maintain). Building wealth starts first by saving small amounts, education & time are what matter most so congratulations on adding to the pool of available knowledge for those looking to improve their situation.

[mike-A]

UK teacher here. The issue isn't around teachers not understanding finance, it's more around the parents having poor financial habits themselves and the kids not taking notice.

[ncksmmrs]

Most people are desperately trying to save enough to buy a home. Many aspire to have a deposit ready in 3-5 years.

This is why so many people use cash ISAs (in conjunction with a LISA, etc.) The 3-5 year time horizon doesn’t make much sense for a S&S ISA.

[colinthornton]

Brilliant message, brilliantly communicated, in a brilliant lace shirt!

[noggintube]

The final comment is very misleading. Yes, no millionaires have been made by investing in savings accounts, but the fact is over 70% of people lose money when trading on the stock market (a figure easily checked) Ok we're not talking about "trading" as such, but it's a valid point. You mentioned it briefly near the end but it was more glossed over of the benefits of cash ISA's and I think you should have put more emphasis on people's age being a major factor. Talking about your Nan and the cost of things when she was a child isn't as relevant to someone nearing retirement for example as that time scale is not really going to happen. Someone just getting their first job however will of course be better suited to avoid a cash ISA for the reasons you mention, so it's entirely dependent on circumstance. Also, as you get into retirement, short term stock market dips can be a major problem if you need to release money. At an age when funding every year to the full matters a lot, waiting another 3 or so years for it to recover (for example) may not be very desirable. It's about spreading the savings across various investments and I think cash ISAs have a good role to play in that.