Consumers prepared to take less risk with their cash than their health


Consumers prepared to take less risk with their cash than their healthMost of us know how important it is to carefully asses the risk of any investment before handing over out hard earned cash.

But new figures reveal how much risk we are prepared to take with our money compared to other areas of our lives.

The research, conducted by the Financial Services Compensation Scheme (FSCS) and unveiled at the same time as they launch the second stage of their consumer awareness campaign, asked people how much risk they would be prepared to take in various areas of their lives; the results were surprising.

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The survey found that whilst 15% of people were prepared to take risks with their own health, only 7% were happy to take risks with their finances. Even more surprisingly people are also prepared to take more risk with their family than they are with their finances.

The area in which people were prepared to take the least amount of risk was in regard to how much personal information they gave over the internet.

Financial risk

The survey also showed how the financial crisis has reduced the amount of risk people are prepared to take with their finances.75% of people said that they are now more cautious about their finances as a result of the financial crisis and only 7% are prepared to take a risk with their savings. However, the research also found that 69% of people thought the money they had saved with UK financial services providers was safe.

Responding to the survey, Mark Neale, Chief Executive of FSCS, said: “The run on Northern Rock over five years ago was a seminal moment for the British public. It has made people more cautious about their money and the risks to it they will accept.”

“Given events it is understandable that people are so risk-averse with their finances. Protection for savings and deposits has improved significantly since 2007 so there is no need for people to worry about any money they have with UK-authorised banks, building societies and credit unions.”

Types of financial risk

There are of course different types of financial risk.

Most people associate financial risk with losing money, for example if the stock market falls causing investments to lose value. To offset this risk, people often put money into savings accounts rather than investing in riskier assets which can rise and fall in value. Whilst using savings accounts, or perhaps fixed rate Cash ISAs will mean that the capital is not effected by falls in the stock market, and may be protected by the FSCS if the bank or building society goes bust, it does leave savers open to ‘inflation risk’.

Put simply, ‘inflation risk’ is the risk that prices rise faster than the value of your savings, eroding their buying power. This is currently a major problem for savers, with interest rates on even the best buy savings accounts plummeting over recent months, making impossible for tax payers to get a real return on their savings.

For non-taxpayers and Cash ISA investors, there are currently a handful of accounts which beat inflation. Click here to see which savings accounts beat inflation.

How does the FSCS protect my savings?

The FSCS protects savings and deposits with over 900 banks and building societies.

In the unlikely event that a bank or building society, which is regulated by the FSA (Financial Services Authority), ceases to trade, the FSCS will protect savers money up to a maximum of £85,000 per person per institution. For a married couple this means that effectively £170,000 of their savings are protected.

Mark Neale, again: “The Financial Services Compensation Scheme is here to protect you and came to the aid of many people during the banking crisis. You can be sure that if you bank, building society or credit union goes bust FSCS will be there to help. The majority of people will get their money back within seven days and the process is automatic, so they will not even have to lift a finger.”

To find out more about the FSCS and whether your bank or building society is covered, click here .

Our team of Independent Financial Advisers in Nottingham are experienced in advising both savers and investors, if you would like advice on your options call one of our IFAs today on 0115 933 8433, alternatively enquire online or email