Ever wondered about the difference between saving in a cash ISA and buying in gold? If you're looking for a safe place to put your hard-earned money, both options have their benefits. That's why we're here to give you a breakdown of the key differences between the two. By the end, you'll have all the facts you need to make an informed decision about where to put your money.
Benefits of saving in a cash ISA
- Cash ISAs are generally considered to be a low-risk saving option, since the money you put into them is guaranteed by the UK government up to a certain amount (currently £85,000 per person per institution). Read more about how safe your money is our our blog.
- Cash ISAs can be a good option if you're looking for a short-term savings solution, since you can usually withdraw your money at any time without penalty.
- Cash ISAs are also a good option if you're looking for a tax-free way to save money, since any interest you earn on your savings is not subject to income tax or capital gains tax.
- Cash ISAs are a simple and easy-to-understand investment product, which makes them a good option for beginner investors who are just starting to explore their options.
Benefits of buying in gold
- Gold has historically been a safe haven alternative, meaning that it tends to hold its value even in times of economic uncertainty. This makes it a good option if you're looking for a way to protect your wealth in case of market volatility or inflation.
HEDGE AGAINST INFLATION
- Gold is often considered a hedge against inflation, which means it retains its value during times of economic uncertainty. On the other hand, a cash ISA may not provide enough return to keep up with inflation, resulting in a loss of purchasing power over time.
PHYSICAL ASSET YOU OWN
- Gold is a tangible asset, meaning that you can physically hold it in your hand. This can be reassuring for some investors who prefer the idea of having a physical asset rather than an abstract financial product like a cash ISA.
- Gold also offers the advantage of not having the same restrictions as ISAs. While ISAs have limits on how much you can invest, gold allows you to invest as much as you can afford. Additionally, you have the flexibility to store your gold wherever you choose, without having to rely on banks. Unlike ISAs that offer limited returns, buying gold can provide significant growth in value, making it a popular choice for those looking for an alternative investment.
POTENTIAL FOR CAPITAL APPRECIATION
- Gold has the potential for capital appreciation, meaning its value may increase over time. The price of gold is affected by various economic factors, such as inflation, interest rates, and geopolitical events. Cash ISAs may not provide as much potential for capital appreciation.
CASH ISA VS GOLD ILLUSTRATION
If you saved £200 a month in gold for ten years. You would have saved £24,000 of your own savings. But the value of your gold would be worth £39,744. That's an extra£15,744 you've made just buying choosing to buy gold.
In comparison if you saved £200 a month in a cash isa. You would of saved £24,000 of your own savings. But the value of your money in your ISA would only be worth £26,071. So that's only £2,071 you've made by leaving your money in an ISA.
Why Cash ISA?
- ISAs provide a tax-efficient investment option as they offer government-sanctioned tax relief. Remember this is only up to a certain amount!
- ISAs offer a variety of options for consumers to choose from.
- Investors do not need to start with a large capital investment to open an ISA.
- Stocks and shares ISAs cater to small-scale investors, making it easier for them to begin investing.
- Gold is a proven asset that tends to hold its value well in times of economic uncertainty. It's durability, rarity, and status as an alternative commodity make it a reliable store of value.
- Gold can also be tax-efficient for some individuals, depending on their circumstances.
- Unlike many other investments, gold is a physical, tangible asset that you can physically hold in your hand.
- Investing in gold allows you to do so without the restrictions that often apply to other investment products.
Please note Minted do not provide financial advise and examples provided above is intended as an illustration. Precious metals are volatile and values can and fluctuate and positive returns are not guaranteed.