Cash ISA vs Stocks & Shares ISA
Understand the critical difference between saving and investing
The Cash ISA Problem: Millions Are Losing Money
Millions of UK residents keep their money in Cash ISAs, believing they're "safe" and "growing." But there's a hidden problem: inflation is silently eroding their wealth.
•Cash ISA interest: Typically 3-5% per year
•UK inflation: Historically 2-4% per year (recently higher)
•Real return: Often 0-2% or even negative!
The result? Your savings grow nominally, but their purchasing power stays flat or even decreases. What you can buy with £10,000 today might require £18,000 in 20 years—but your Cash ISA won't keep up.
Cash ISA Calculator
Tax-free savings up to £20,000/year
Warning: Cash ISAs Often Lose to Inflation
While your money grows nominally, inflation erodes its real purchasing power. See the impact below.
Cash ISA is a savings account with tax-free interest. However, if interest rates are lower than inflation, you lose purchasing power over time.
Max £1667/month to stay within annual limit
Typical Cash ISA: 3-5%
UK average: 2-4% (historically)
Enter your details and click Calculate
See how inflation affects your savings
Why Cash ISAs Often Lose:
- Interest rates (3-5%) often below inflation (3-4%)
- Your money loses purchasing power over time
- What costs £100 today might cost £180 in 20 years
- Consider Stocks & Shares ISA for long-term growth (7-10% returns)
Stocks & Shares ISA Calculator
Tax-free investment growth up to £20,000/year
Results shown with default values. Change any input below and click Calculate to see your personalized results.
Stocks & Shares ISA lets you invest up to £20,000/year completely tax-free. No capital gains tax, no dividend tax, no income tax on growth.
Max £1667/month to stay within annual limit
Global stock market average: 7-10%
Enter your details and click Calculate
See your tax-free investment growth
ISA Benefits:
- No capital gains tax on profits
- No dividend tax on income
- No income tax on interest
- Annual allowance: £20,000
- Withdraw anytime tax-free
Cash ISA: The "Safe" Option
What it is: A savings account where interest is tax-free. Your money is protected by FSCS up to £85,000 per institution.
The appeal: No risk of losing your initial deposit. You know exactly how much you'll have.
The problem: Interest rates rarely beat inflation. Your money is "safe" in nominal terms, but loses purchasing power over time.
Example: £10,000 in a Cash ISA at 4% grows to £21,911 in 20 years. But with 3% inflation, its real value is only £12,146—barely ahead of your contributions!
Stocks & Shares ISA: The Growth Option
What it is: An investment account where you buy stocks, bonds, or funds. All growth is tax-free.
The appeal: Historical returns of 7-10% per year, significantly outpacing inflation and building real wealth.
The risk: Your investments can go down as well as up. But over 10+ years, markets historically recover and grow.
Example: £10,000 in a Stocks & Shares ISA at 7% grows to £38,697 in 20 years. After 3% inflation, its real value is £21,426—genuine wealth creation!
Key Takeaways: When to Use Each
Use Cash ISA For:
- ✓Emergency fund (3-6 months expenses)
- ✓Short-term savings (1-3 years)
- ✓Money you need guaranteed access to
- ✓House deposit you're saving for soon
Use Stocks & Shares ISA For:
- ✓Long-term wealth building (5+ years)
- ✓Retirement savings
- ✓Children's future (Junior ISA)
- ✓Beating inflation and building real wealth
Smart Strategy: Use both! Keep 3-6 months expenses in a Cash ISA for emergencies, then invest the rest in a Stocks & Shares ISA for long-term growth. This balances safety with wealth creation.
Ready to Start Investing?
Learn how to open a Stocks & Shares ISA and start building real wealth