Cash deposits, these usually being cash accounts at a bank, are a popular choice for those looking to save their money.

However, like any financial decision, they come with their own set of advantages and disadvantages.

Understanding these can help you make informed decisions about your finances, and that is exactly why this article is here!

What Are Cash Deposits?

Cash deposits refer to money placed in a bank or other financial institution’s savings or current account.

These deposits can earn interest over time, providing a safe and steady way to grow your savings (albeit generally low growth).

The Pros of Cash Deposits

Security

One of the most significant advantages of cash deposits is security.

Banks and financial institutions offer protection through government-backed insurance schemes, such as your first CHF 100’000 per bank guaranteed by the Swiss Government, or GBP 85,000 guaranteed by the UK Government.

This ensures that your money is safe (usually up-to a certain amount), even if the bank fails.

Liquidity

Cash deposits also provide excellent liquidity (access).

You can access your money quickly and easily without any penalties.

This makes cash deposits ideal for emergency funds or short-term savings goals.

Predictable Returns

With cash deposits, you will typically earn a fixed interest rate. 

This predictability makes it easier to plan your finances and budget for future needs.

Unlike investments in stocks or bonds, the return on cash deposits is not subject to market fluctuations.

The Cons of Cash Deposits

Low Returns

One of the primary drawbacks of cash deposits is the relatively low return on investment.

Interest rates on savings accounts are often much lower than potential returns from other investment options such as stocks, bonds, or real estate.

In fact, you may not keep up with inflation.

Inflation Risk

If your money does not grow by inflation each year, you will be able to buy less and less with the same amount of money.

While your money is usually safe in a cash deposit, this is the price you pay for that security.

This risk is determined by the interest rate. If it is lower than inflation, you will be losing money.

Limited Growth Potential

Cash deposits do not offer the potential for significant growth.

For long-term financial goals, such as retirement savings, relying solely on cash deposits may not be sufficient to meet your needs.

Factors to Consider

When deciding whether to use cash deposits, consider your financial goals, risk tolerance, and time horizon, amongst many other things. 

For short-term goals and emergency funds, cash deposits can be an excellent choice.

However, for long-term growth, diversifying your investments with Patterson Mills is likely to be more beneficial.

Save, Spend or Invest?

Cash deposits allow you to save and spend, but do not have the same growth potential as other investments.

Hence, the lower risk and lower volatility part of cash deposits can be attractive for shorter-term goals, whilst for longer-term goals you should speak with Patterson Mills to be able to better understand how cash deposits may, or may not, align with your needs.

Do not wait any longer, get in touch with Patterson Mills today and book your initial, no-cost and no-obligation meeting to ensure you are making the right decisions for you.

Send us an e-mail to contactus@pattersonmills.ch or call us direct at +41 21 801 36 84 and we shall be pleased to assist you.