Cash use rises but maintaining a savings account remains key, finance experts say

Cash usage has grown for the first time in a decade with 19% of purchases made with notes and coins currency last year, according to the British Retail Consortium.

The consortium said the “natural return” to cash following a pandemic slump signifies an increasingly budget-conscious consumer in response to the cost of living crisis.

However, finance experts at money.co.uk savings accounts have warned that, despite the growth of physical currency, it’s important to keep some funds in a savings account as well.

Lucinda O’Brien, expert at money.co.uk savings accounts, said: “While cash provides immediate access, having money in a savings account enhances financial security, facilitates long-term financial planning and gives you the opportunity to earn some interest.

“The interest earnings help to offset the impact of rising prices as inflation can lead to a decrease in the purchasing power of money. If you keep a significant amount of physical currency over an extended period without it earning interest or growing in value, its real value will decline.

“This is because the prices of goods and services generally increase at a quicker rate than the value of currency, meaning your money is effectively worth less than it once was.

“What’s more, physical currency doesn’t generate interest on its own, while savings accounts provide handy returns over time. By keeping money in a savings account, you can earn interest on your balance – helping to grow your savings.

“The security of maintaining a savings account over a stockpile of cash is also vital.

“A savings account is an ideal place to build an emergency fund, which is one of the keys to financial stability. Having a financial safety net can help cover unexpected expenses, providing peace of mind and preventing the need to rely on credit cards or loans in times of crisis.

“Similarly, savings accounts provide a secure place to store your money, with funds protected by the Financial Services Compensation Scheme (FSCS), which typically protects you from losing up to £85,000 of savings if your provider faces financial difficulties. However, ensure that your provider is covered, as not all are protected by the scheme.

“It’s also important to note that cash can be at risk of loss or theft.

“And while one of the main bonuses of coins and notes is accessibility, remember that you can also gain immediate access to your money with an instant access savings account.

“Currently, Metro Bank’s Instant Access Savings account provides an excellent 5.22% rate, with instant access to your funds. To claim, you must have a minimum balance of £500 within 28 days of opening the account.”