Financial resilience tends to get talked about as if it’s one thing – usually shorthand for “how much have you got saved.” In practice it’s built in two quite different places: the cash you can get your hands on immediately, and how the rest of your money is actually invested. They protect against different kinds of shock, and most people only ever think seriously about the first.
The obvious one: money you can reach without a plan
A boiler failing, a period without work, an unplanned repair bill – these are the shocks a cash buffer exists for, and the standard guidance hasn’t really changed in years: somewhere around three to six months of essential outgoings, held somewhere you can access without notice or penalty. Where that sits matters too. A Cash ISA or easy-access savings account both work; what doesn’t work well is money that’s technically “savings” but is actually tied up in a notice account or invested in the stock market, because the whole point of this layer is that it’s there the moment you need it, not three weeks or one bad market day later.
Income protection insurance sits alongside this rather than replacing it. Statutory Sick Pay was reformed in April 2026 – it’s now paid from the first day of illness rather than after three waiting days, and the old minimum-earnings threshold to qualify has been scrapped – but at £123.25 a week (or 80% of average earnings if that’s lower), it’s still rarely enough to cover much beyond the basics, and most employer sick pay schemes taper off or stop well before a serious illness or injury resolves itself. An income protection policy is built for exactly that gap: a proportion of income, usually up to around 60-70%, paid out from an agreed point after you stop being able to work, for as long as you’re unable to. It’s worth a conversation specifically because most people who’d benefit from it have never actually priced it, and tend to assume it costs more than it does.
The less obvious one: how your invested money behaves when markets fall
The second layer is easy to overlook because it isn’t sitting in a separate account – it’s how the growth portion of your money is actually managed. Stock markets are cyclical by nature: periods of sustained rises tend to be followed, eventually, by periods of falls, and the timing of neither is predictable in advance. The traditional response is simply to stay invested and diversified across asset classes and accept the ride, on the basis that markets have historically recovered over the long term. That remains a perfectly reasonable approach, and for money with a long time horizon it’s often the right one.
An alternative that’s had serious academic attention is trend following – a systematic, rules-based approach that reduces exposure to an asset class once it moves into a sustained downtrend, and increases it again once the trend turns positive, rather than making that call subjectively. Research published in the Journal of Behavioral and Experimental Finance by academics at Cass Business School (City, University of London) and the University of York found that applying trend-following rules across a multi-asset portfolio improved risk-adjusted returns and, notably, reduced the depth of the worst drawdowns compared with a simple buy-and-hold approach over their study period. The appeal isn’t that it avoids losses altogether – no approach does that – but that it can make the size and shape of them more manageable, which matters more than it might sound for anyone drawing an income from their investments rather than only growing them.
It’s worth being equally clear about where this kind of approach struggles. A sudden, sharp market fall – the kind that happens in days rather than unfolding over weeks or months – can do its damage before a trend-based signal has time to react, since it works by responding to a trend that’s already established rather than predicting one that hasn’t started yet. No systematic approach removes investment risk; the honest claim is that it changes the shape of that risk, not that it eliminates it.
Why both layers matter together
The two aren’t really substitutes for each other. A cash buffer handles the shock that needs money today – a boiler, a redundancy, a few months without income – regardless of what markets happen to be doing at the time. A more disciplined approach to the invested portion addresses a slower-moving risk: what happens to the money that’s meant to fund your future if it’s forced to weather a downturn at exactly the wrong moment, particularly once you’re taking an income from it rather than only adding to it. A financial plan that’s only thought through one of these tends to discover the gap at the worst possible time – which is really the whole argument for looking at both together, well before either is actually tested.
Let’s look at both sides of your own plan
We work with clients across Poole, Bournemouth and the wider Dorset area on both the cash side of resilience and how the invested portion of a portfolio is managed through the more difficult periods, rather than treating either in isolation. If you’d like to talk through your own approach to either, get in touch and we’re happy to have a no-obligation conversation.
This article is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only. All information is correct at the time of writing (September 2026) and is subject to change in the future.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance, and no investment strategy can guarantee against loss.
Income protection insurance is subject to insurer terms, exclusions and underwriting, and may not cover every circumstance in which you’re unable to work. Please check the terms of any policy carefully.
The Financial Conduct Authority does not regulate cash savings.