Opinions & Curious...what is too much money in the bank/building society?

[Deleted User]

Hi, I'm new to the forum and interested in Growth and Investing for the long-term. I have opened an ISA with Aviva through a Financial Advisor and looking to invest in other ways extra funds ie. £50k max. My family has always kept funds in the bank locked away in fixed terms for YEARS and they have gained very little interest, we continuously rolled the fixed terms over year after year. Money has been kept in the 1 bank and exceeded more than what the FCSA can guarantee which is up to £85k nowadays. I am a little late on investing and only now starting to get educated on saving and investing and opened a stocks and shares ISA and wanting to invest in other ways too that will grow my funds. I have a work pension through NHS and I am 43, hopefully I can retire by 60 and maybe cut down my hours to part-time when I'm 50, 55 years old approx.

Curious to know is this a common thing for people to have more than £85k held under the 1 bank/building society umbrella company? What have you heard is the maximum amount that anyone has holding in 1 bank/building society umbrella company? Or what is the smartest thing to do.. eg. to only keep a 3-6 month emergency fund and current account in a bank and all other money in eg. ISA, OEICS, ETFs? or what I have done recently, until I can decide what to do, is withdrew funds and opened another savings account under a different bank/building society ie. Nationwide Flex Direct which offers 5% up to £2,500 per month.

What are people's thoughts on holding too much money in a bank/building society? :money:

El_Torro

You're touching on two issues here: One is having too much money in one bank so that you will lose a chunk of it if the bank goes bust. This is easily solved by having no more than £85k with one institution. I think this is a sensible thing to do for everyone, though there are many people who don't do this. Personally my total cash holding is significantly less than £85k so I don't have this problem.

The second issue is having too much cash overall. Like you say for many people (especially those who are currently working) it makes sense to have an emergency fund and the rest invested. This should give you a better long term return than having a significant amount of money in cash.

There will be situations where having more than 6 months worth of cash makes sense. For example for people who are retired and have their pensions invested in growth funds, they will want the cash buffer to spend when their investments are low.


If anyone does have a legitimate reason to have a very large amount of cash, where many £85k accounts are impractical; I would suggest using NS&I where the total amount is secure, not just the first £85k.

[Deleted User]

Thanks for the reply El Torro. Your first response is what I took care of immediately and that was to move funds that exceeded £85k to another banking institution so this will not happen if the bank goes bust.

I agree this is too much cash at the moment and also as you mentioned as people are in retirement, it's good to have a cash flow available to access when needed.

Thank you the recommendation of NS&I, I will check out their website.

DrSyn

With NS&I you are loaning money to the UK government. If they go bust, then we all are in trouble.

Whatever you intend to invest in I would suggest you watch both of these, if you have not already:-

http://www.kroijer.com/

https://www.ifa.com/indexfundsthemovie/

pinknsparkly

Deleted_User wrote: »

Your first response is what I took care of immediately and that was to move funds that exceeded £85k to another banking institution so this will not happen if the bank goes bust.

Your original post don't make it clear whether or not you share finances with another adult in your family, but if you do then something else to be aware of is that for joint accounts, the funds are protected up to £170,000 per banking institution (i.e. £85,000 per account holder). I realise you've already moved your excess money, and are also considering reducing your cash holdings anyway but it might be useful for future reference (or other readers).

I agree with previous comments that there are circumstances in which holding such a large amount of money in cash is prudent, but in the majority of cases it would be advisable to consider investing any excess that can be locked away for at least 5 years in stocks and shares.

[Deleted User]

DrSyn wrote: »

With NS&I you are loaning money to the UK government. If they go bust, then we all are in trouble.

Whatever you intend to invest in I would suggest you watch both of these, if you have not already:-

I COULD NOT INCLUDE THE LINKS AS I AM A NEW USER

]

Thank you for your reply and for giving your perspective on NS&I! I have not watched these videos so I will definitely do that before investing.

Albermarle

Maybe a note of caution . If you follow the good advice above and start to transfer cash savings into market investments , then probably best to do it gradually ( in my opinion although there are other schools of thought ) particularly taking into account :
1) Global stock markets have been going up for some years , so chance of a reverse at some point is quite high
2) Outlook for more medium risk investments is for returns not much higher than long term (safe) savings .
3) If you do switch a large amount of cash into investments and your timing was unlucky , you would probably be as sick as the proverbial parrot, and it might put you off investing in future.

After all those years of being a saver , no need to rush any changes , and be clear about the possible risks and rewards in your own mind.

DrSyn

After watching both those videos, a good place to consider to start investing is a Global Multi Asset Fund such as on of those below:-

Vanguard Life Strategy
HSBC Global Strategy
L&G Multi Index Funds
Blackrock Consensus
Architas Passive

These have wide diversification while minimising risk, at low cost.

Vanguard Life Strategy (VLS) seems the most often mentioned on this site.

https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds?intcmpgn=lifestrategyfunds_learnmore_link

Take a look and you can discuss it with your adviser.

[Deleted User]

pinknsparkly wrote: »

Your original post don't make it clear whether or not you share finances with another adult in your family, but if you do then something else to be aware of is that for joint accounts, the funds are protected up to £170,000 per banking institution (i.e. £85,000 per account holder). I realise you've already moved your excess money, and are also considering reducing your cash holdings anyway but it might be useful for future reference (or other readers).

I agree with previous comments that there are circumstances in which holding such a large amount of money in cash is prudent, but in the majority of cases it would be advisable to consider investing any excess that can be locked away for at least 5 years in stocks and shares.

The finances are solely in my name now so I moved the excess to HSBC and Nationwide from my regular bank to take advantage of the 5% interest they were offering in the first year. I have a joint account with my husband for emergency fund so will move that back from Nationwide after the year. I would definitely consider locking away for at least 5 years.

[Deleted User]

DrSyn wrote: »

After watching both those videos, a good place to consider to start investing is a Global Multi Asset Fund such as on of those below:-

Vanguard Life Strategy
HSBC Global Strategy
L&G Multi Index Funds
Blackrock Consensus
Architas Passive

These have wide diversification while minimising risk, at low cost.

Vanguard Life Strategy (VLS) seems the most often mentioned on this site.

https://www.vanguardinvestor.co.uk/investing-explained/what-are-lifestrategy-funds?intcmpgn=lifestrategyfunds_learnmore_link

Take a look and you can discuss it with your adviser.

thanks for this DrSyn!