Households are holding record amounts in cash – how much should you invest?

Stock markets may be hitting record highs but this isn’t filtering through to the UK’s investment culture.

Major indices such as the FTSE 100 have reached record levels in recent months, but Brits still seem hesitant to start investing.

Many may have been burned by the dotcom crash, with research by Fidelity showing households remain significantly less invested today than they were at the height of the late‑1990s boom.

That is despite more than two decades of subsequent market growth.

At the same time, households are still holding on to a record level of their wealth in cash^.

Why cash remains king

Fidelity analysed government data covering almost four decades and found that UK households reached a peak for investing in 1999, when around 23% of their financial assets were held directly in investments such as stocks and funds.

But when the technology bubble burst, equity valuations fell sharply and the value of households’ stock market holdings declined.

Households have steadily shifted towards cash rather than stocks and shares since.

By the end of 2025, 35% of household financial assets were held in cash, the highest proportion since records began in the 1980s, Fidelity said.

At the same time, only around 17% was held directly in investments, leaving the gap between cash and market participation close to record highs.

Marianna Hunt, personal finance specialist at Fidelity International, said: “While market downturns are a recurring feature of economic cycles, our analysis highlights that the dotcom crash may have left a structural mark on UK investing behaviour.

“Despite strong global equity returns in the decades since, households have not meaningfully rebuilt direct exposure to markets. Since the early 2000s, UK households have been net sellers of investments in most years, even through periods of recovery.

“The result is a persistent retreat from capital markets, one that contrasts with other major economies – such as the US – where household investment levels are now significantly higher than in the late 1990s.”

How much should you invest?

Experienced investors know that keeping too much money in cash means your savings can be more easily affected by inflation.

Investing has been shown to outperform returns on savings over the long term, but beyond keeping around three to six months of emergency cash accessible, there is no set rule on how much of your money should go into financial markets.

Anita Wright, chartered financial planner at Ribble Wealth Management, highlights that much of the nation’s wealth sits with baby boomers, many of whom lived through high inflation eras, the dotcom crash, and the global financial crisis of 2008 .

These are experiences that she said understandably reinforce a preference for cash and property over stock markets.

She added: “There isn’t a one size fits all answer for how much to invest. A practical way to think about it is in layers: short-term money for emergencies and known costs, medium-term savings for goals within a few years, and longer term capital that can tolerate market ups and downs.

“The longer the time horizon, the more room there may be to consider investing,” Wright added.

Riz Malik, financial adviser for R3 Wealth, suggests factoring in your immediate needs, what may come up within the next five years, and what is left over. What remains is what you should consider for wider options.

He said: “I sometimes say, ‘if I fast-forwarded time and we are five years in the future, how much of what you have is still likely to be there?’

“It’s a great way to kick off the conversation and get people thinking.”