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Lockdown lifted your savings? Top tips for making your money work for you

 

Daniela Attenborough, financial consultant at Wesleyan Group, the specialist financial services mutual for teachers explores how teachers can get the most out of their lockdown savings.

 

In the face of long hours, high workloads and the challenges of adapting to remote and online learning,

managing personal finances might have understandably fallen to the bottom of your to-do list.

 

Lockdown might, however, have given you the opportunity to save more than usual. Our own research

found that, on average, individuals saved £276 a month during the coronavirus pandemic, compared

with £240 before.

 

If you have been able to put some extra away, it will be important to consider how you can use this

money to support your personal and financial goals and make it work as hard as you do.

 

Here are four key things to think about when it comes to using those extra lockdown savings.

 

Review your savings plans and targets

 

Any saving habit should be accompanied by a savings strategy – understanding what you need the

money for, combined with your own personal circumstances, will help you determine the best way to

manage your money.

 

Being able to save that little bit extra over the past year might have meant that you’re now closer to any

existing goals you had established, or in a better position to set-up new ones.

 

As a very first step it will be important to review your targets to ensure they align with your current

circumstances.

 

Before putting money towards any goals, however, consider whether you need to start, or top-up, an

emergency fund for a rainy day first.

 

Setting aside three months’ worth of net household income is a good starting buffer. With this in place,

you can then think about committing money to other savings pots.

 

Don’t overlook retirement

 

For some, retirement can feel like a long way off, but it’s important to start planning for the day you step

back from the classroom as early as possible.

 

You may want to consider putting any extra lockdown savings towards your retirement plans. Speaking

to a financial adviser can help you understand the best way to put your money towards your retirement

– be it investing, or by purchasing additional pension through the Teachers’ Pension Scheme (TPS).

 

If you haven’t yet established a retirement strategy, now could be the perfect time to do so.

 

It’s important to consider factors such as when you’d like to retire, and what retirement will look like to

you. From here, you can determine how much income you will need at different stages of your retirement

and how you can grow your pension pot.

 

Again, a financial adviser can support with this process – they can help you calculate the financial

implications of choices such as taking a phased retirement or working past your retirement date, and

understand when you can start to withdraw funds from your pension savings.

Investing, investing, investing

 

With interest rates currently lower than inflation, simply keeping cash in the bank means that the value

of your savings effectively falls over time.

Putting some of your extra lockdown savings into investments can provide a way to grow your wealth

by helping to beat low interest rates, outperform inflation and build new income streams. And you don’t

need huge sums to start investing – any amount of money can be put to work.

 

The very first thing to consider is whether investing is right for you. Investing isn’t a ‘quick win’ and generally takes place over longer periods of time – at least five years, but typically longer. If you know you might need your savings sooner, investing might not be the right option.

 

You will also need to consider your appetite to risk – the value of your investments can go down as well

as up. Each asset you can invest in, whether it’s property, bonds, cash or stocks, comes with its own level of risk, as well as its own degree of reward. Diversifying your investment portfolio by spreading investments across asset classes can offer a degree of protection against a single asset’s poor performance.

An easy way to do this is to put your money in an investment fund that covers many different types of

assets, spreading the overall risk. Each fund has a risk rating that you can use to see if it’s a good fit

for you. Please remember the value of investments can go down as well as up and you may get back less than you invest.

 

Maximise tax-efficiencies

 

Using your tax-free savings allowances can help you make the most out of the lockdown cash you’ve

put aside. Putting your money in an Individual Savings Account (ISA) could be a good option to consider.

You can save up to £20,000 tax-free into an ISA for both the 2020-21 tax year and for the upcoming

2021-2022 with no tax charged on any interest earned.

 

The deadline for using your ISA allowance for 2020-21 is midnight on 5 April, and you won’t be able to

carry over any unused allowance from year to year.

There are a range of ISA types you can use. For example, a cash ISA allows you to save money in

cash, meanwhile, a ‘stocks & shares’ ISA – such as Wesleyan’s With Profits ISA – allows you to make

investments with your money in assets like funds, bonds or individual stocks.**

Wesleyan’s With Profits Fund was recently ranked 1st place* for its five-year net return of 7.31% by independent actuarial services provider Barnett Waddingham. And because it’s an ISA, our customers didn’t pay tax on any returns they earnt.

 

At Wesleyan Financial Services , we understand the unique financial needs of teachers. Our specialist financial consultants are available who can offer advice at every stage of your savings journey, from setting targets through to reviewing your pension savings.

 

For more information visit: Stocks and Shares ISA for Teachers (wesleyan.co.uk)

 

 

Please note that past performance is not a reliable guide to future performance and the value of your investment can go down as well as up, so you could get back less than you invested.