Navigating the finance system in a new country can be daunting. You have to learn new tax rules, set up a bank account, and learn how best to manage your money. You also need to understand how to protect your money from theft and loss within the UK banking system.
Whether you’re at the start of your savings journey, or want a secure place to keep your hard-earned cash over the years, here are your options for safely saving your money in the UK.
Financial risks in the UK
Many people are wary of where they keep their money. With credit card fraud and online scams on the rise, there are lots of financial risks to be aware of, including:
- Digital bank fraud — cybercriminals can steal money from online bank accounts
- Cash theft — burglaries and muggings are traumatic and expensive if you carry large sums of cash
- Investment risks — there’s no guarantee you’ll get a return on your stocks and shares
- High tax payments — you can pay a large amount of tax if you don’t manage your savings carefully.
You avoid these risks by finding secure ways to store your money, and using our safe banking tips.
Where can you keep your money in the UK?
Most people in the UK keep their day-to-day money in a current account. This is your main bank account that’s used for regular purchases and bills. Your wage is usually paid into your current account.
While current accounts are very safe if they’re regulated by the FCA, they shouldn’t be used to hold large sums of money for 3 key reasons:
- If you become a victim of digital bank fraud, criminals can access all your money, since it’s all kept in one place
- Most current accounts have low interest rates, so you’re not making the best use of your money
- The FCA protects up to £85,000 of your savings per banking group if your bank goes bankrupt through FSCS protection — so if you have more than this in one bank account, you could lose the excess amount.
Current accounts are secure — but they’re not ideal for savings. Instead choose a purpose-built savings solution to protect your cash and make it work for you. There are many options for storing your money in the UK, including:
- Savings accounts and ISAs
- Investment portfolios
- Real estate purchases
- Trust funds
- Money clubs, sometimes known as rotating savings and credit associations.
So should you save or invest your money?
Consider saving your money if…
- You’re debt-free (excluding a mortgage)
- You don’t have a lot of money currently saved
- You don’t want to take any risks with your money
- You need a place to keep your money that aligns with your religious values, such as a Sharia-compliant savings account
Consider investing if…
- You’re debt-free (excluding a mortgage)
- You have a substantial amount of savings
- You don’t mind taking a risk with your money, and can afford to lose some of it.
If you have any debts (excluding mortgage payments), you should aim to pay these off before you start saving. Overdrafts, credit cards, and loan debts often incur interest, so the longer it takes to pay off your debt, the more you’ll pay in the long run.
Are there other places to keep your money?
Savings accounts, credit unions, and investment portfolios are the most common places people choose to store their money. But these aren’t the only options.
Money clubs are a popular way to pool money within growing UK communities. They help people across the community plan for what’s important to them.
Traditionally, money clubs involve exchanging cash. But despite the rise in banking fraud, online banking is far safer. Even if you become a victim of digital banking fraud, your bank may be able to recover your funds. Using an FCA-regulated money club app like Bloom to manage your money club is a great way to ensure your money is protected, without using formal savings accounts or investment schemes. Find out more about how Bloom works.
If you have a lot of money, investing in property can be a safe, lucrative way to store it. Like any type of investment, buying real estate is a risk — you may ultimately lose money when you sell the house. But housing and property is generally considered a safe investment to make.
You can also put your money in a trust fund. Trust funds are designed to make sure your money is used the way you want. It’s normally used to put money aside for your children or grandchildren, or for your own care in later life.
Where’s the safest place to keep your money?
The safest places to keep your money are savings accounts or electronic money institutions (EMIs) that are regulated by the Financial Conduct Authority. Under the Financial Services Compensation Scheme (FSCS), your savings will be protected even if the bank goes bust.
Interest rates on savings accounts are currently low. So you won’t get a big return on your savings in a standard savings account. If you want your savings to help you make more money, you may want to consider investing.
Investments can go up or down in value. It’s usually expected that the longer you invest for, the more you’ll make (though this is never guaranteed).
As an example, this graph shows the value of UK house prices between 2006 and 2022. If you bought a house in 2006 and sold it in 2008, you may have lost money on your investment. But if you bought a house in 2008 and sold it in 2010, you probably sold it for more than you bought it.
While savings are usually much safer than investments, you’re usually more likely to make money if you invest long-term.
Is cryptocurrency a safe investment?
Cryptocurrency like Bitcoin is in the news a lot at the moment. It’s a relatively new digital currency that many people have recently invested in. But it’s an extremely volatile market — and the value of cryptocurrency is currently in decline. Bitcoin value fell by almost 50% between January and July 2022.
If you’re looking for a safe place to store your money, it’s best to avoid cryptocurrency investments unless you’re confident and well-educated on the technology.
Is Bitcoin halal? Find out in our guide to cryptocurrency for Muslims.
What happens if you need access to your money?
If you buy a house, it’s hard to extract your money in case of a financial emergency. So you need to balance easy access to your money with financial safety.
- Cash — if you keep your money in cash you’ll have instant access to it, but this is probably the least secure place to store money, especially in large quantities
- Savings accounts — easy or instant access savings accounts often have lower interest or AER rates than long-term savings accounts, but you can withdraw money whenever you need to
- Money clubs — you’ll receive your payout in line with the schedule set at the start of the money club cycle, so while you can’t withdraw your money instantly, you know when you’ll receive it — and it helps you plan for the important things
- Investment portfolio — you can sell your investments any time, but if stocks and shares tumble, you may sell for less than you bought them for — so this is usually reserved for those who can make long-term investments
- Trust funds — when your money is in trust, you can’t access it until you or your beneficiaries need to pay for the trust’s intended services.
Tips for banking and saving safely in the UK
Safe banking in the UK is easy if you follow a few simple rules. Here are our top tips for keeping your money safe:
- Never invest more money than you can afford to lose
- Use strong passwords and/or multi-factor authentication for any online banking services or EMIs
- Don’t share your online banking password or PIN number with anyone
- Get trustworthy financial advice from a reputable source
- Only use banks, financial services, or EMIs that are protected by the FSCS
- Pay off any debt before you start saving to reduce the interest you’ll pay on loans or credit cards
- Don’t keep large sums of money in your current account
- Don’t keep large amounts of cash at home or on your person
- Use an FCA-regulated money club app to manage your money club.
Find out more about how Bloom’s money club app works to help you and your community save in a safe, convenient way.
