Two very different ways to grow the same monthly contribution
This calculator takes an identical monthly contribution and projects it two ways: growing at a cash savings rate, and growing at an assumed investment return, so you can see the illustrative difference in outcome side by side. It's a simplified version of a genuinely important decision many people face with spare income — save it in an interest-paying account, or invest it with the expectation (but not the guarantee) of a higher long-run return.
Why the higher rate isn't automatically the right answer
Investment returns come with a level of risk that cash savings, protected up to the current Financial Services Compensation Scheme limit per institution, simply don't carry in the same way. An investment can fall in value, sometimes significantly, and there's no guarantee the assumed return will materialise over any specific period, particularly a short one. Cash savings' lower average return is, in effect, the price paid for that greater certainty and instant, stable accessibility. Our FSCS guide explains exactly what protection cash savings carry.
Time horizon is usually the deciding factor
The general guidance that shapes this decision for most people is fairly consistent: money needed within the next one to five years is generally better kept in cash, where a market downturn shortly before you need the money can't force you to sell at a loss; money genuinely not needed for five, ten or more years has more time to ride out market volatility, which is where investing's higher long-run average return has historically had room to show through. This calculator's default ten-year horizon sits in the zone where many people start seriously weighing the two options against each other.
You don't have to choose only one
In practice, most sensible financial plans use both: cash for an emergency fund and short-term goals, investments for longer-term goals where time is on your side. This calculator compares two extremes purely to illustrate the gap between them — your own real-world plan will likely blend the two in proportions that suit your own goals, timeline and comfort with risk. Our risk tolerance guide can help you think through where your own balance should sit.
What the "difference" figure is really showing
The gap between the two projected values in this calculator is illustrative, not a promised outcome — it shows what the difference would be if both assumed rates held exactly steady for the entire period, which cash rates can do reasonably closely but investment returns almost never do in practice. Use it to understand the scale of potential opportunity cost from staying entirely in cash for money that could realistically afford to be invested instead, not as a guaranteed future gap between the two paths. Our lump sum versus regular investment calculator looks at a related question — how you get money into an investment, once you've decided investing is the right route.
A worked example
Using the calculator's defaults — £250 a month for 10 years — at a 4% cash savings rate the projected value comes to roughly £36,800. At a 6% assumed investment return on exactly the same monthly contribution and term, the projected value rises to about £40,900 — a difference of around £4,100 over the decade, purely from the two percentage point gap in assumed rate.
Stretch the same comparison to 25 years instead of 10, and the gap widens dramatically: cash at 4% projects to roughly £128,900, while investing at 6% projects to approximately £173,900 — a difference of about £45,000, more than ten times the 10-year gap. This is the clearest illustration of why the case for investing rather than saving in cash strengthens considerably the longer your money has to work.
A middle-ground approach many people use
Rather than treating this as an all-or-nothing choice, many people run a blended approach: keeping a cash buffer for near-term needs and genuine emergencies, while directing money earmarked for goals five or more years away towards investments instead. The proportion allocated to each tends to shift gradually as a goal approaches — someone investing towards a house deposit might hold mostly investments early on and gradually move the balance into cash as the likely purchase date nears, precisely to avoid a badly timed market fall disrupting a near-term plan.
Frequently asked questions
How do I decide my own time horizon for this comparison?
Think about when you're realistically likely to need the money — a house deposit in three years points towards cash, while a retirement fund 25 years away points towards investing, at least for the portion you won't need in the near term.
Does inflation favour one side of this comparison?
Inflation reduces the real value of both outcomes, but a lower cash rate is more likely to sit below inflation than a higher investment return, meaning cash savings are generally more exposed to real-terms erosion over long periods — see our inflation erosion calculator for that specific effect.
Is it ever wrong to invest at all?
For money you might need at short notice, or that you can't afford to see fall in value even temporarily, cash is usually the more appropriate choice regardless of the potential return gap — the right answer depends on your own circumstances, not on maximising a projected number.
What if I can't decide and just want a simple default?
A widely used starting rule of thumb is to keep three to six months of essential expenses in cash and consider investing money genuinely earmarked for goals more than five years away — though this should be adjusted to your own job security, dependants and comfort with risk.
Do interest rates and investment returns tend to move together?
Not consistently — cash rates broadly track the Bank of England base rate, while investment returns are driven by company earnings, market sentiment and a wider set of economic factors, so the two can move in the same direction, opposite directions, or independently over any given period.