Cash & mental wellbeing

We like to think we make rational choices – but the decisions we make are often guided by emotion. This is especially true with money. Interestingly, the way we approach money can also shape the way we feel.

A 2024 study found that people who saved regularly had higher mental wellbeing and life satisfaction. They slept better, felt less anxious, and were more optimistic about the future. They also felt more in control of their finances.

NS&I savers – whose deposits are 100% FSCS-protected – reported higher mental wellbeing than Cash ISA holders. They also showed similar scores to people with Premium Bonds or Stocks & Shares ISAs. It suggests many people value the security of their savings just as much – if not more – than potentially higher returns.

Saving regularly is also linked to higher life satisfaction, regardless of age, relationship status, or health. In fact, lower earners who saved regularly had similar life satisfaction to non-savers with higher incomes.

Other research highlighted similar benefits for people’s sense of financial security.

Vanguard’s 2025 research found households with three to six months of expenses saved reported 34% higher financial wellbeing. Additionally, 51% of clients without emergency savings said their financial stress increased year on year.

Together, these studies show the habit of saving – even small amounts – boosts mental and financial wellbeing, and life satisfaction. Of course, how much is enough is personal and different for everyone. The adviser's job is to find out each client’s comfort level. 

Why understanding bias matters for advisers

Sometimes, emotion can trump reason when it comes to cash decisions. Understanding the behavioural biases guiding these choices can help advisers interpret client decisions and help them strike the right balance.

Mental accounting

One bias people have when managing their finances is mental accounting – creating separate savings pots for different goals. For example, having one savings account for holidays, another for home renovation, and a third for a child’s education.

It’s a familiar and comforting way to stay organised. But from an adviser’s perspective, it can also mean clients double up on saving for the same goal. For example, parents saving for their child’s education in 10 years might already have an investment account.  Yet they may still open a savings pot towards the same goal, simply because it feels safer and more controlled.

Loss aversion

Another powerful bias is loss aversion. It’s argued that we feel financial setbacks more than equivalent gains. To avoid the sting, savers prefer to focus on growing savings safely instead of opting for potentially riskier investments.

Present bias

Another behaviour is present bias, prioritising short-term comfort over long-term rewards – even if the latter is higher. This leads people to value ready-to-use cash more than returns from other long-term investments.

These behaviours appear most in certain clients. Typically, people who are risk-averse, new to investing, retired or close to retirement, or who’ve experienced major financial shocks.

Clients don’t disclose everything to their advisers

These feelings can be so ingrained that they sometimes outweigh rational explanations. Clients may know that it’s best to listen to their financial adviser. But they’re wary of losing control.

Advisers commonly recommend that cash forms part of a wider investment portfolio. However, the idea of placing more wealth in investments can take risk-averse clients further out of their comfort zone. This feeling of extra, unwanted risk can erode trust and open an emotional gap in the client-adviser relationship.

To retain a sense of comfort and control, clients may not disclose their full cash savings to advisers. As a result, advisers may not have an accurate picture of all their clients’ cash. But if clients don’t manage it well, inflation can erode their cash’s value. It may also lack adequate protection.

Our savings inertia report showed clients don’t shop around for the best interest rates. And even if they know better rates exist elsewhere, many won’t make a change. Staying with the trusted bank they’ve always used is comfortable and safe – even if it hits them in the pocket. In fact:  

• Only 34% remember how much interest they’ve earned in the past year.
• 40% don’t check their interest rate more than once a year.
• More than 3 in 5 households haven’t moved even part of their savings to a different bank in the last 12 months.

Cash management platforms can help

Advising on cash shows clients you understand more than the numbers. You understand how they feel about money.

A cash management platform helps advisers ensure clients’ cash grows and stays protected.

With Flagstone, clients keep full control of their cash. They can open multiple savings accounts from 65+ banks, satisfying their need for mental accounting while maximising FSCS protecton*. Advisers also have complete visibility of their clients’ Flagstone portfolios – so they can monitor it without the heavy lifting.

By meeting their need for safety and control, you build trust and strengthen the client relationship. This can help them open up about their emotional triggers and financial beliefs. It also lays a foundation where you can gradually introduce risk-averse clients to new asset classes, like stocks and shares.

It’s an easy way to balance logic and emotion – helping cautious clients build confidence, wealth, and wellbeing, step by step.

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*Up to £120,000 on individual accounts with the same bank.