Cash deposits

Cash deposits are mainly for Savings rather than investment but we mention it here as it is considered one of the four main asset classes. Cash deposits – bank and building-society accounts – are an excellent place for money needed for the short term (under five years) and for an emergency fund.

Cash deposits are generally considered to be safe – there are only usually problems if the bank or building society goes bust and this is very rare. The downside is that the returns may not be particularly attractive over the long term. And the effect of inflation on your money means that the money you save will buy less each year. To protect against this you should look for an after-tax interest rate that is more than the rate of inflation.

If you use cash deposits to save for the long term, say for your retirement, you run a higher risk that you might not have as much money as you need than if you'd invested in a personal pension scheme, for example.