Teachers’ five financial focuses for 2024

Oonagh Morrison, Regional Manager at Wesleyan Financial Services, the specialist financial mutual for teachers

2023 was a financially challenging year for many teachers, but looking forward we can now see some cause for optimism.

Inflation is on the way down[1], while interest rates appear to have peaked and have been forecast to start falling in the first half of 2024[2].

So, what does this mean for teachers and how can they make the most of their money in the year ahead? As we start the new year, taking time out of your busy schedules to plan for the future can really pay off. Here are five financial priorities I’m recommending teachers consider for 2024.

Protect your pension

For younger teachers at the start of their careers, preparing for retirement can seem like a low priority and there can be a temptation to opt out of the Teachers’ Pension Scheme (TPS) to save some money.

After all, you can always catch up later, right?

But this would be a false economy – any contributions you can afford to make to your pension now can ultimately be far more valuable than contributions made later in your career.

By starting to save as early as possible, you could build yourself a larger pension pot, take advantage of valuable tax breaks, and be in a position to retire earlier than you otherwise would be.

If you are closer to retirement, make sure you’re considering all of your options for stepping back from the classroom.

Retirement doesn’t have to mean a full break from work if you don’t want it – a valuable option in the TPS is taking a ‘phased’ retirement, where you release some of your pension but reduce your workload. This gives great flexibility, and you can even keep contributing to your pension pot while you’re still working.

Wherever you are on the journey towards retirement you’re at, it’s always good to seek advice from a financial adviser that understands the TPS. They can help you create a bespoke retirement plan, and put it in action.

Get ready for a rainy day

The foundation of any financial planning is to have some spare cash set aside that’s easy to access in case of emergencies. If you don’t have this, consider making it a priority for 2024.

The rule of thumb for a ‘rainy day fund’ is to save a minimum of three times your net monthly income if you’re single, or three times your joint household income if you’re a couple.

That should be enough of a savings pot to cover any unforeseen expenses like a hole in the roof or a broken boiler, without you having to break into your savings or investments.

At the same time, also think about whether you’d benefit from income protection – an insurance policy that pays your salary if you’re off work through ill health.  

Most teachers will be eligible to up to full pay for 100 work days, and half pay for a further 100 working days through their employers.

That’s a good occupational benefit, and it might seem unlikely that you would have to take a year or more off work. But one leading UK insurer reports that the average length of an income protection insurance claim is actually over six years[3].

Income protection insurance gives you peace of mind that you’ll continue to have income to meet your essential costs should the worst happen.

Double down on debt

Spending on a credit card is convenient, but it is an expensive form of debt that can attract very high rates of interest.

If you have debt, do what you can to shrink it, or investigate ways to reduce the cost, like taking out a loan with a lower interest rate to pay off more expensive debts.

Manage your mortgage

At the time of writing, experts on the economy expect interest rates to start falling during 2024.

If your mortgage is coming to an end, you may be wondering whether to stick with a tracker mortgage or fix for a few years.

Falling rates may also open the door to first time buyers, who have been holding off while rates were so high. But it may be worth saving up a bigger deposit and waiting for rates to fall further, for example.

Whatever your circumstances, it’s worth taking advice sooner, rather than later, so you can keep your options open and make an informed decision on what pathway will be best for you.

After all, just a small difference in interest rates could amount to thousands of pounds over the life of a mortgage.

Be a super saver

Leaving extra cash languishing in a current account could be a missed opportunity.

Even in a savings account, where it might be earning a better rate of interest, the effect of inflation can seriously erode its value.

Could that money be invested, and given the chance to grow more over the longer term?

Investing through a stocks and shares ISA can also provide the benefit of keeping any growth or dividends you earn from your investments free of tax.

Choosing a stocks and shares ISA that invests in funds managed on your behalf by an experienced fund manager means you don’t need any particular investment expertise, and you can access your money whenever you want.

For example, Wesleyan’s With Profits ISA allows you to invest in our With Profits Fund, and may be well suited to an investor who prefers a ‘smoother’ investment journey. It reduces volatility by holding back some profits when investments are doing well, then paying them out again during periods of weaker performance – with all returns tax-free due to the ISA wrapper.

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

Wesleyan Financial Services provides specialist financial advice and products to teachers across the UK.

For more information, or to see how we can help you with your financial goals, visit www.wesleyan.co.uk or call 0800 980 2277.

This information is based on our current understanding of legislation. The information contained in this article does not constitute financial advice.

Wesleyan Financial Services Ltd (registered in England and Wales No. 1651212) is authorised and regulated by the Financial Conduct Authority.

Registered office: Colmore Circus, Birmingham B4 6AR

Telephone: 0345 351 2352

Calls may be recorded to help us provide, monitor and improv our services to you.

[1] https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/l55o/mm23

[2] https://www.theguardian.com/business/2024/jan/11/bank-of-england-may-cut-interest-rate-sooner-after-surprise-inflation-forecast

[3] https://static.aviva.io/content/dam/document-library/adviser/individualprotection/pt151147-2020_individual_protection_claims_report.pdf