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Written by Simon Rake, Head of Education

Cost-of-living crisis – impacts for education professionals

teaching and education
3 min read
Man sitting at desk with laptop on phone

Simon Rake, Head of Education at Wesleyan Financial Services, shares his insights on how soaring inflation and energy rates may impact education professionals in the near future…

On top of industry pressures that you face in education, the last thing needed is additional pressures from a turbulent financial landscape.

We’re currently facing an amplified cost-of-living crisis, spurred on by a rise in cost for transport, fuel and a large leap in energy prices. In fact, the consumer price index hit its highest level in 30 years in December and has increased further to hit 5.7% at the start of February.

The reality is that there are very tangible impacts for education professionals from a personal finance perspective.

Here are the top areas for consideration:

Impact of inflation and erosion of savings

Inflation is expected to hit 7.25% by April this year, which is more than triple the Bank of England’s target of 2%. What this means for those who have funds sitting within savings, is that their savings are at serious risk of being eroded by inflation over time.

The Bank of England has nudged up its interest rate today following the initial increase in December to help combat inflation. However, most people won’t have noticed a positive impact on their finances, especially with UK wage growth slowing and rising energy and food prices.

The best easy-access savings rate on the market is currently at 0.75% and it is possible to obtain a rate of 2.2% if you’re willing to lock your cash away for five years, which won’t stack up against inflation should it reach 7.25%.*

Many of education professionals we support are conscientious savers and to protect your wealth, one way to overcome this particular financial hurdle is to think about other ways you can make use of your savings. The money you hold onto as cash, slowly loses its buying power due to inflation. However, by investing, you can expect to achieve higher returns over time, with the aim of at least beating inflation.

You won’t have easy access to your money during the investment period, but it could help put you in a better position to ride out the storm and retain as much wealth as possible, particularly with a long-term approach. Of course, it is worth remembering that investing needs to be in line with your risk appetite. Please remember the value of investments, and any income can go down as well as up and you may get back less than you invest.

What does the crisis mean for your retirement plans?

Whilst your teachers’ pension is index linked to protect it from rises in the cost of living, we support many education professionals who are saving for an early retirement. How much more will you need to save to retain the same standard of living, if inflation remains above that level for a sustained period of time? How much harder would your investments need to work?

These are the questions you need answers to, in order to secure your retirement plan from derailment during this type of economic turbulence. 

Speak to a specialist

There’s a lot going on in the education landscape that may affect your financial position and planning for the future.

If you’d like further advice on how to overcome upcoming challenges and create a projection for your retirement and savings, you can speak to a Specialist Financial Adviser from Wesleyan Financial Services.

* Correct at time of publication, rates may vary over time.

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