Simon Rake, head of education at the Wesleyan Financial Services, the specialist financial services firm for teachers, discusses new data about how the cost-of-living crisis is impacting teachers and shares practical advice for managing your money.
Increased costs are affecting us all. For teachers, who’s pay increases have trailed behind inflation for years, the cost-of-living crisis is even more difficult.
Costly energy bills, increasing mortgage rates and expensive weekly food shops are all putting pressure on already stretched pay packets.
New research from Wesleyan Financial Services has revealed that many teachers are planning on taking action to help manage their finances through this challenging time – with some surprising results.
While most teachers are already committing far and above their contracted hours, one in 12 teachers said they planned to increase their working hours because of rising prices. Putting additional pressure on themselves to work even harder, for even longer.
A further one in ten (8%) said they would take on more hours in their role to help boost their income.
But perhaps most surprisingly, one in six teachers said they would delay their retirement to help them through the cost-of-living crisis.
As we hear from some teachers that they expect their financial situation to get worse in the next twelve months, here are tips to help teachers manage their finances.
Put proper plans in place
When money is tight it can feel tempting to bury your head in the sand, but this only kicks problems into the long grass, where they can build into more complex issues.
Start by looking at your expenditure and assessing what income you need to cover those costs. Then, if you can, make cuts to non-essential spending such as magazine subscriptions.
For those struggling with day-to-day living costs this can feel like it won’t make much of a difference, but even small savings can quickly add up.
Once this is complete, and you’ve done a true audit of what you’ve got coming in and going out, you can start to plan for your financial future. This might include paying off a mortgage, saving for special event or putting more money away for grandchildren. Once you’ve planned what you want to achieve you can cost up your goals and start saving for them.
Cancelling policies like income protection might save a few pounds in the short term, it could leave you exposed should you find yourself needing to claim on it.
Remember the three Rs – retirement, retirement, retirement
Planning solely for short goals is not enough, there also needs to be long-term financial planning for retirement and having the pension pot in place to grant the retirement lifestyle you wish for.
Typically saving for long-term goals takes the longest amount of time and requires the most dedicated course of action – saving over years for the benefit of your future self.
With rising costs, it can be tempting to put these long-term goals on the back burner. I would advise against this and with the latest budget announcements the correct retirement planning is essential, making the most of using your TPS pension as part of your long-term savings goals.
If you’re one of the teachers who is thinking about delaying retirement, seek professional financial advice around this decision – and the implications, first.
Recognise the power of small savings
Einstein said that compound interest is the eight wonder of the world, and he may have been under playing it.
When it comes to savings, having money locked away, earning even modest interest, can made a huge difference to its value over the long-term.
Even if you’re only able to save small amounts of money irregularly, ensuring you are saving in an account that is earning the best interest rates will ensure that it maintains its spending power over the long-term.
What’s more taking advantage of tax efficient tax-wrappers like ISAs can protect any saving growth from tax liabilities.
Make the most of investments
Investing your money in a varied managed fund with exposure to assets likes stocks and shares in the market, rather than fixed rate savings accounts also creates a better chance of outstripping inflation. It doesn’t have to be complicated. Products like With Profits Stocks and Shares ISAs give you access to a managed fund, led by experts who make the day-to-day decisions on which companies and assets your money is invested in.
Over time, money in the market tends to perform better than that kept in savings accounts, and can also outpace inflation, meaning your money doesn’t lose its spending power.
Of course, market volatility is a risk and there is a chance that that your investment may go down in value, but you can vary how much risk you’re prepared to take with your money.
Get financial advice
What’s for certain is that, at a time when the cost-of-living is continuing to put pressure on pay packets, teachers will find there are challenges in balancing their books.
Getting support from financial advisors that understand the unique challenges teachers face can be a huge difference. Whether you’re starting out or getting ready to retire, speaking to someone who understands your financial position, and how to best maximise it for your enjoyment is the best way forward.
For more information visit [https://www.wesleyan.co.uk/teachers].