The Learning Centre:
The top 3 financial challenges faced by education members (and how to solve them)
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In 2016, Educators Financial Group launched the Financial Kickstart Challenge — a self-directed online resource, exclusively dedicated to increasing the financial literacy of education members like you.
Since its launch, over 2,200 Ontario education community members (at various stages of their career) have taken part in the Financial Kickstart Challenge, which starts with a self-assessment questionnaire that identifies their main financial pain points. It then goes on to provide a series of educator-specific lessons to help conquer them.
What kinds of financial pain points has the Financial Kickstart Challenge uncovered?
Here are the top 3 financial challenges faced by education members—and more importantly, tips on how to solve them:
Challenge #3: Take advantage of a deferred salary plan
29% of (working) education members want to take advantage of a Deferred Salary Plan (such as an ‘X over Y’ or ‘4 over 5’) but think they can’t afford to.
It’s one of the perks of being an educator. Yet only a small portion of you actively thought about taking advantage of a Deferred Salary Plan, with most feeling held back because of your finances. If you’re lower on the pay grid, this is for good reason, since you would be receiving a reduced pay cheque in order to fund your year away.
For example, if you decided to take a ‘4 over 5’, you would work full-time for 4 consecutive years while collecting 80% of your salary. The remaining 20% (over those 4 years) would then be banked away for year 5 (the year you would take your leave).
So what’s the solution for making a deferred salary leave affordable, even if you’re lower on the pay grid?
- First set up a budget to see how living on a reduced salary would impact your regular monthly expenses (click here for tips on how to build a budget that works)
- Next, look for ways you can maximize your monthly cash flow by cutting back on unnecessary expenses—which will provide some breathing room to your budget
- Then use the savings from the expenses you’ve scaled back on above to set up a ‘deferred salary fund’—this will give you a financial cushion to use during your year away (setting up a pre-authorized contribution plan, for example, is an easy way to save for a ‘4 over 5’ or any other future goals)
Challenge #2: Thinking pension income won’t be enough to fund retirement
47% of education members think that their pension won’t be enough to fund their retirement.
Education members tend to retire earlier than the average Canadian. That, coupled with longer life expectancies, means that your retirement years could outweigh your working years. It’s a definite possibility when you consider the Ontario Teachers’ Pension Plan (OTPP) currently pays out pensions to over 142 retired Ontario teachers over the age of 100.*
Whether or not your own (future) retirement is on a course free of any pension income gaps, naturally depends on a host of financial variables (such as the debt load you carry, whether your mortgage will be paid off by retirement, how many children you have/are putting through school, whether you’re single income or have a spouse, etc.).
Regardless of your own situation, here are a few ways you can be proactive when it comes to giving yourself added financial peace of mind in retirement:
- Use the Pension Income Gap Assessor to calculate whether your pension will really be enough to maintain the retirement lifestyle you envision
- Check out Retirement 101 for 5 investment strategies to get you saving beyond your pension
- Learn about 3 ways to make your money work harder for you in retirement
Challenge #1: Not having enough cash flow in the summer months
48% of educators find summers more difficult to manage financially.
Having more free time in the summer means the potential to spend more money. It’s little wonder why just under half of education members are feeling the pinch during July and August. If you’re retired, summer is a time when you might be spending more of your pension income on trips to see your kids and grandkids.
However, there are a few easy solutions you can implement in order to help you better manage your finances and increase your cash flow, not just in the summer—but all year round:
- Shop around for interest rates: If your cash flow is feeling particularly pinched, it could be because of the interest on your loans and credit cards are higher than you need to be paying (that’s where consolidating all that high-interest debt into one low-rate line of credit, for example, can save you serious money)
- Cut back on unnecessary expenses: This is something we’ve mentioned earlier, yet it also very much applies if you’re looking to boost your cash flow (in fact, here are 5 tips for saving up to $500 a month)
- Start a ‘Summer Fund’: Whether your goals for summer are to travel, renovate the house, or simply relax—starting a dedicated savings plan is your best solution for giving yourself a cash flow boost when you need it most (learn more about how to put your own financial plan into motion)
In the end, the best way to solve any financial challenge is to increase your financial literacy.
That’s where the Educators Financial Kickstart Challenge comes in. If you haven’t yet taken the challenge, it’s time to take your first step towards turning your financial pain points into financial freedom. Take the Financial Kickstart Challenge NOW!
Need help conquering your own financial challenges? Have one of our financial specialists contact you.
Statistics in this article courtesy of the Educators Financial Group Kickstart Challenge
The information provided is general in nature and is provided with the understanding that it may not be relied upon as, nor considered to be, the rendering of tax, legal, accounting or professional advice. Please ensure to consult your accountant and/or legal advisor for specific advice related to your circumstances. Educators Financial Group will not be held responsible or liable for any losses, costs, damages or expenses incurred by reason of reliance as a result of the aforementioned information. The information presented was obtained from sources that are believed to be reliable. However, Educators Financial Group cannot guarantee their completeness or accuracy.