Britain has one of the lowest personal savings rates among rich countries now, and possibly the way we tend to talk about financial risk is part of the problem.
If you try to open up any sort of investment account in the UK you are warned, very clearly, that your capital is at risk, and this might just scare everyday would-be investors so much that they decide it’s safer to do nothing.
And instead of inviting people to invest, those words push them toward cash accounts, where inflation quietly eats away at their money.
A lot of young people now associate investing with gambling, quite possibly linked to their social media feeds being full of crypto-hype, most of which is, you know it's true, gambling!
But if this is becoming the default norm then increasing numbers of people are missing out on benefitting from steady investments which yield well over the long-term, even while stocks fluctuate month to month and year to year, most of my safe stock market Vests have trended up much faster than the rate of inflation.
The Problem with Cash...
Cash may feel safe, but so many people have thousands of pounds stashed in low interest accounts, and their losing money relative to the cost of living. Over 5,10 and especially 20 years, £100 000 becomes £80 000 or less, without you even realising it!
So maybe people need to be issued more warnings about the risks of 'doing nothing'!?!?
This is especially important now that people are expected to take care of their own finances in retirement - the idea that the government is always going to take care of you is fading, so people need much more in-your-face warnings about the erosions of inflation.
There's also the fact here that it's the poor who are more likely to hold what little savings they do have as cash, so they are going to be impacted hardest by this cost of doing nothing!
Final thoughts....
If you want people to invest, you have to strike a balance. Tell the truth about market risk, but don’t let “your capital is at risk” scare everyone away from taking steps that—over time—actually help. Modern economies rely on people investing for retirement and the future. But if people get overwhelmed, or think the system is rigged, they’ll just hide out in cash, even when that hurts them in the long run.