It’s ok to not optimise your cash holdings

Optimising cash cartoon

What do you do with you cash savings? Is it under the mattress? Is it in the current account you first set up as a teenager? Do you even have cash savings?

A lot of those in the FI and personal finance communities online would advocate spreading your cash funds around various different high interest current accounts, in order to maximise the interest available to people looking to hold their funds in cash.

As you can see from figure 1 and 2 below, since the financial crash average interest rates on savings accounts have rarely kept up with inflation. This has meant that many people are looking to alternative means to make the most of the interest they could be earning.

Optimising cash chart
Fig. 1
Optimising cash graph
Fig. 2.

Bring in the high interest current account.

Providing higher levels of returns on your cash savings, the high interest current accounts, an alternative to the low interest traditional savings accounts, usually limit their users to the amount they’re able to earn interest on at any one time. It also usually requires a minimum amount you must pay in every month.

Now I know you can get 5% up to £2,500 in a Nationwide Flex account or 5% up to 1.5% in a TSB current account, but there isn’t a great deal of attraction to these for me when you’re needing to manage 3,970 account logins for an extra £25 a year or whatever non-facetious amount it actually is. I also don’t want to be transferring money here there and everywhere to meet minimum payment requirements. Plus I don’t want my money anywhere near TSB considering the issues they have had yet again last week…no thank you, I’ll stick to ironing my hands.

A lot of the financial forums I read are obsessed with the idea of ‘sit back and relax’, passive investing. Why wouldn’t you be? It’s the easiest, cheapest and most reliable way of receiving a fairly decent return on your money. So why do these same people obsess over scraping and scrimping for that extra 0.5% of interest on their emergency cash savings? God forbid you even consider Premium Bonds as a lower rate taxpayer.

Honestly? I don’t know. Maybe people enjoy the routine every month of moving money between accounts. Or maybe this routine adds to the obsession of optimisation that permeates the finance blogosphere.

Don’t get me wrong I love a bit of financial optimisation. Since following many different blogs and podcasts on how to make the most out of your money and really thinking about the worth of material goods, my eyes have been well and truly opened to these concepts.

But does there come a point where my time is worth more than an extra £38.30 annual interest? Quite frankly…yes.

I currently keep my cash in a 1.1% cash Isa. 0.4% less than what I could get with Goldman Sachs Marcus account, or the various 5% current accounts. But this account is kept right next to my credit account and my main debit account- one login required. In one click I can transfer money over easily and pay off any unseen expenses instantaneously, and I know it’s going to work.

I know you can set up direct debits to automate everything going in and out of your accounts, but I’ve heard too many times about payments being delayed and the minimum requirements for these accounts not being fulfilled. Give me the easy option any day.

I’ve never thought of cash, or emergency savings, as something that needs to be earning you more money like your investments. It’s there to provide comfort, a piece of mind that no matter what you’ll always have an answer to any financial issue that may arise. The little bit of money you receive in interest every year is just the clichéd cherry on the cake in my mind.

For me, this doesn’t come with having small pots of cash all over the place with 10 different banks, with varying degrees of customer service helpfulness if things go tits up. It comes with accessibility, limited effort and to know, no matter what, any sleepless nights I have are never because my direct debit has forgotten to do its job.

So if you’re reading this and are on the fence about opening tonnes of accounts and having to organise the moving of your money around every month, take time to think if its worth. Not just worth it because some guy on the Internet told you if you don’t do this in X years your savings will have disappeared with inflation, but worth it for what your cash/ emergency savings are there for in the first place…peace of mind.




Fig. 1 and 2:

14 thoughts on “It’s ok to not optimise your cash holdings

  1. I agree! Way too much hassle to be constantly switching accounts and having a tonne of direct debits set up purely for the extra 50p a month you might make. It’s all so small fry with interest rates what they are.

    Liked by 2 people

  2. I do have several bank accounts to manage my finances but not through switching (apart from one) – my main account is the same one I’ve banked with for nearly 25 years, which was my only switch from the bank I was with as a student. I have a TSB current account for its 3% but the transfer in and out is automated so no need to monitor that. I also have a Starling account which I use for travelling and finally a Tesco account for my matched betting. Oh and a bit in a Nationwide Cash ISA. The rest of my cash? Sitting in Premium Bonds – I don’t care what the naysayers say – I’ll be the one laughing when I win the big prize! 😉

    Liked by 1 person

    1. Lots of love for Starling!
      I love that! Premium Bonds are so often frowned upon by the FI community but I’ve always wanted to throw some money in for the fun of it too. I may add it to my ‘to-do’ list to get that done soon, and who knows, by Christmas I could be semi-retired from winning the top prize…alongside yourself of course haha!

      Liked by 1 person

  3. At last! Someone else who ‘fesses up to not sweating the small stuff with cash. I CBA with that rigmarole either, and for several years carried a couple of years’ worth of basic outgoings in cash against market falls that didn’t come. Yep, I lost some value in that, but flogging every last penny with lots of accounts isn’t my bag.

    I am tempted to the dark side with Premium Bonds too. Largely because NS&I is secure, well, if it isn’t there are bigger problems than the loss of money, and if you have a lot in PBs then statistically you will get some steady and tax-free return through the dribble of small prizes.

    Liked by 1 person

    1. Definitely! Premium Bonds are going to be on my New Years (financial) resolution list to incorporate into my finances. They seem like good fun for money you won’t get much in the way of interest from in a normal savings account.


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