Glen Roberts, Regional Manager from Wesleyan Financial Services, shares his insights on what teachers need to know when it comes to savings and investing.
Saving money is one of the most important financial habits anyone can adopt – it can help you to deal and better navigate unexpected costs and emergency situations. And it can help you to achieve your short-, medium- and long-term goals. In short, there is no better time than the present to be thinking about saving money, if you have not already done so.
I worked as a financial adviser for many years, during this time I was often asked by clients to explore the differences between savings and investing, and to provide guidance on which option would be preferable.
To begin to better understand this, it’s a good idea to think about what might motivate head teachers to save for their future. Typically, we can break down the rationale for saving into four areas; those saving for a rainy day, those saving for a specific purchase or event, such as a house, a wedding, the trip of a lifetime etc., those saving for retirement to supplement their pensions, and lastly, those saving for the future of their children – which may be for university, or again a house deposit.
What are the differences between savings and investments?
Cash Savings
Cash savings accounts could be described as a way of storing your money for when you need it. Cash savings can be easily accessed and are generally used to put money aside for short to medium term goals. The downside here, however, is that whilst more predictable, interest rates in cash savings accounts, tend to be lower, meaning that although it may feel safer keeping the money in a bank account i.e. you get back what you put in, in real terms however, the value of cash savings is eroded over time during times of high inflation. To give an illustrative example of this, according to the Bank of England’s Inflation calculator, goods and services costing £100 in 2020, would cost £124.52 in January 2025.
Investments
In its simplest form, an investment could be described as the purchase of an asset with the hope of increasing its value over time. Investments typically include stocks and shares and funds.
Although investment returns may be greater than cash savings, there is of course the risk that when you invest, you could get back less than you put in. People invest for different reasons, it may be to provide an additional income stream, or for growth or for compound growth.
Another important consideration surrounding investment is your attitude towards risk and how much volatility you’re prepared to accept, as well as the length of time you have for your investment. Generally speaking, however, investments are used for longer term goals. This is because, when it comes to investing, time is your friend. The sooner you start investing, the longer you’re able to leave the money to grow and work for you, the better.
Which option is best for you?
As to which of the two options is more suitable for you, will very much depend on your individual circumstances and financial goals and objectives, as well as your attitude towards risk. It may be one or the other, or indeed a combination – there is no one size fits all when it comes to financial planning.
One of the first things to think about, if you haven’t done so already, would be to build an emergency cash savings account worth approximately six months of income, for in the case of a rainy day. Once you have built your emergency fund, any further savings or investments would depend on the objective you are saving for, and when you need access to the money.
Important considerations
When it comes to allocating money to saving – whether that be for short-, medium- or long-term goals, it is useful to think about what you have coming in and what’s going out. When considering outgoings, a good question to ask yourself is, are they all deliberate, or do some of them just happen to you? Are you allocating money to your future self as part of your budgeting? This might be for goals such as saving to support your children through university, or to have additional flexibility in retirement, or to save towards a particular hobby or a second property – whatever it may be, by allocating money to a savings vehicle on a regular basis, you can make progress towards that goal.
A common phenomenon that can hinder efforts to save for the future, is the effect of the lifestyle creep. This is where, when an increase in salary occurs, lifestyle costs quietly, but steadily, increase alongside – meaning that the additional income gets allocated to cover those increasing lifestyle costs, rather than being put aside for the future.
A helpful tip here is to remember to ‘pay yourself first’ i.e. when you receive your monthly salary, it’s a good idea to put some of it aside in a place that you are not going to access. If you have already made that commitment to save and the money you have put to one side is not immediately accessible, this will help you to build funds for the future. What often happens is that when people leave it until the end of the month to try and save, this is typically a time that funds are depleted, and this can result in the commitment to saving being postponed to the following month and so forth.
How can specialist support help?
A good financial adviser will encourage you to think about whether you are being deliberate about where you’re spending your money, and whether you are planning and saving for the future, rather than leaving it until later. For example, if you have children, you may want to help them in the future, be that through private education or university costs, or helping them with driving lessons and buying their first car or getting on the property ladder. The question to ask here is, when are you going to make that decision to start saving some money? If it is left until any children are aged 16 for example, you won’t have much time to allocate the funds, nor will the funds have much time to grow.
In terms of what the most suitable vehicle is for saving, depends on individual circumstances, as is always the case with financial planning. This is where the input of a specialist financial adviser can be extremely useful. They can assess your situation as a whole, helping you to understand your options so that you are in a position to make well-informed decisions for your future.
Bear in mind that the value of investments can go down as well as up and you may get back less than you invest.
The NAHT is an introducer appointed representative of Wesleyan Financial Services Limited.
Advice is provided by Wesleyan Financial Services Ltd.
NAHT is a trade union whose registered office is situated at Centenary House, 93-95 Borough High Street, London SE1 1NL. Telephone: 0300 30 30 333; website: www.naht.org.uk. NAHT is an introducer-appointed representative of Wesleyan Financial Services Limited.
‘WESLEYAN’ is a trading name of the Wesleyan Group of companies.
If you would like support or guidance on understanding your financial position, speak to a Specialist Financial Adviser at Wesleyan Financial Services for a financial review by visiting: A better financial future for teachers. Charges may apply. You will not be charged until you have agreed the services you require and the associated costs. Learn more about our charges here.
About: Glen Roberts is a Regional Manager from Wesleyan Financial Services leading a team of specialist financial advisers who help to support teachers and their families with financial planning to secure their financial futures.
Glen is based near Sherwood Forest in Nottinghamshire, he joined Wesleyan Financial Services in 2019 and has now worked in the financial services industry for over 25 years. Having achieved Chartered status with the Chartered Insurance Institute he continues to learn and is currently studying for a Coaching qualification.
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 improve our services to you.