Savers could see the cash Isa tax-free allowance reduced in the Autumn Budget, as Chancellor Rachel Reeves looks for ways to steer more people towards investing.
But new research from Moneybox suggests many are still hesitant. Some 87% of cash Isa savers said they would need a sizeable financial buffer before investing, with the average amount coming in at £27,600.
But is a buffer of that size really necessary? Here’s what the data tells us about the gap between attitudes to investing and the level of savings most people actually need.
Please note: the content contained in this article is for information purposes only and does not constitute financial or investment advice.
Why savers are holding back from investing
Reeves is on a mission to get Britons investing. In her Mansion House speech in July, she said: ‘For too long, we have presented investment in too negative a light, quick to warn people of the risks, without giving proper weight to the benefits.’
The Financial Conduct Authority says around seven million UK adults with at least £10,000 in cash are missing out on the benefits of investing.
The numbers speak for themselves: analysis by investment platform IG shows that since 1999, UK stock market investors have seen around seven times the real return of cash savers, after inflation.
But, of course, investment success isn’t guaranteed. You should always make sure to have savings in cash set aside for emergencies first – but the question is how much?
- Find out more: best stocks and share Isa rates
How much you need to save
The magic number is £27,617 according to the cash Isa savers who were surveyed by Moneybox, but in reality, this is far more than is necessary for most people.
The generally accepted rule is to have at least three months’ worth of essential outgoings saved in cash, and have your debts under control first.
How much this amounts to will vary from person to person, but, as a useful illustration, the average UK household spent £623.30 per week in 2024, or about £2,700 per month, according to the ONS. Under this scenario, you might want to hold around £8,100 in cash savings before starting to invest.
Budgeting apps such as Emma and Snoop can help you work out your monthly outgoings and keep track of your spending.
You’ll also want to make sure your cash savings are held in an account that’s easy to access and pays a decent rate of interest. The best instant-access cash Isa rate at the time of writing was Plum’s cash Isa, offering 4.45% (AER).
- Find out more: best cash Isa rates 2025
Average weekly household expenditure in the UK, 2024
How to start investing
Once you’re ready, you’ll need to decide what to invest in. A financial adviser can guide you, although many people prefer to make their own choices.
Beginners often start with low-cost index funds, which give broad market exposure with less risk. More confident investors may opt for individual shares or alternative assets such as commodities or corporate bonds.
In general, you should be prepared to part with your money for at least five years to give your investments a better chance of riding out dips in the market. This is particularly important if you’re close to retirement.
And don’t forget to diversify your portfolio. Diversification means spreading your money across different types of investments to protect yourself during periods of market volatility.
A common approach is asset allocation, where you split your portfolio between cash, bonds and shares. It also helps to invest across industries that do not always move together, such as banking and consumer goods.
- Find out more: Investing for beginners