Young Investors Are Moving Fast: How They're Flipping Cash Into Investments

Written by: Emma Wall | Hargreaves Lansdown

• 15% of consumers would move from savings to investments if rates fell.
• This rises to 24% amongst those aged 18-34.
• This falls to just 7% for those aged over 55.

Figures from a survey of 2,000 people by Opinium for HL in 2024

Despite stubborn inflation, market consensus is that the Bank of England will cut interest rates further through 2025. Earlier this month, the Bank of England cut interest rates from 4.75% to 4.5% in a move widely anticipated by analysts. But while the headline figure did not come as a surprise, some of the detail under the bonnet did. Arch hawk Catherine Mann, who voted against cutting rates twice last year, called for a 50-basis point reduction in the most recent meeting. Adapting strategy in light of changing data is the sign of a well-functioning Committee. But it does fuel optimism for lower rates – and a lesser debt burden.

There are of course two sides to every rate story, while corporates, consumers and even countries with leverage will welcome lower rates, savers won’t. The past couple of years have seen meaningful interest paid on deposit, a real return for many consumers after a near decade of negative real rates.

Industry calls for scrapping the cash ISA in recent weeks hope these cuts will fuel investment into the stock market, but we do not agree. As HL’s CEO, Dan Olley, recently stated, any reform must focus on how we remove barriers to helping individuals save and invest to achieve their financial freedom, not add them. Only by doing this will we boost the level of investment across the UK and, in turn, support the UK stock market and domestic growth.

So, what would tempt savers to become investors? According to a survey for HL by Opinium, 15% of consumers would move from savings to investments if rates fell. This rises to 24% amongst those aged 18-34, though falls to just 7% for those aged over 55. Not surprising given the horizon-linked attitudes to market risk for these different cohorts.  For those aged 18-34 who are considering investing for the first time, look for a fund with broad market exposure, for a low cost, such as an iShares ACWI ETF, which is invested in more than 2,000 companies from both developed and emerging markets.

This is a great core option for first time investors, to which you can add additional satellite holdings that reflect your risk appetite, outlook or interests.

Related: Who Wants To Be a Millionaire? The Habits of Highly Effective Investors