Why Teachers Need Financial Education
Start with Why
Most people who have worked with me have probably heard me ask the question WHY?
I was pretty committed to the question WHY? even before I read Simon Sinek’s book Start with Why and it is fair to say that reading his work validated my desire to keep asking it!
It’s where I like to start with most new ideas that I’m trying to work my way through.
(I’m also very aware that it is a quality of mine that is not necessarily super endearing to my supervisors! )
If you can convince me of the WHY, I can usually help find several ideas about how to make it happen.
So WHY am I launching this blog and this business?
On my journey to this moment, I have come to believe these three things:
1. Financial wellness requires financial knowledge.
2. Most teachers have not received much or any financial education. As a result, many of lack an understanding or appreciation of some of the foundational building blocks we need to build a strong financial plan for our families.
3. The Teacher’s Pension Plan falsely lulls many of us into a sense of financial complacency.
A Bit About My Journey to Here
Perhaps it is different for you, but no one ever taught me, either in school or at home any of the basics of personal finance.
When I started my career as a teacher, it is remarkable to me now how very, very little I knew about personal finance.
It goes without saying that I would be in a whole different financial situation now if I had known then HALF of what I know now! And I bet the same is true for you.
I am now in my 28th year as a teacher. A whole lot of life has happened along the way! Through the many highs and lows, there have been some key moments that pushed me forward to launching this next stage of my career as a financial educator. Here are some of these big life moments for me:
I was excited to get my very first couple of term jobs and fall in love with teaching. Then, I got laid off during tough economic times and was forced to rethink my plan. I was grateful that my expenses were low as I picked up a couple of side hustle gigs and went back to school.
I followed my partner’s job and had the experience of relocating to a new province where my credentials weren’t recognized. It was hard.
I had children. I’m pretty sure they are the best thing that has ever happened to me, But they too, are sometimes very hard!
I had a 22 year long relationship with the coparent of my children breakdown, and I came to understand many of the complexities of a separation. It remains hard.
I got frustrated with the state of education so I signed on for more education and I became a better teacher and fell back in love with the profession all over again.
I lost my beloved younger brother to cancer. I saw firsthand how unforgiving some small mistakes in his estate plan have affected his widow and children. It remains hard.
Although each of us has our own journey to this moment, I’m sure you can identify a few of the Big Life Moments that have changed your path.
In my case, these moments made me realize that I still did not know nearly enough about personal finance to build a reasonable, secure financial plan for myself and my children. So I went back to school again!
Two years ago, I signed up to pursue a graduate diploma in Professional Financial Services through Fanshawe College. So far, I have studied courses in Investment Planning, Insurance, Taxation, Financial Planning, Laws and Ethics as well as Wills and Estates. I have loved learning about these concepts and look forward to the courses in my final year.
I can confidently say that this program has significantly changed my perception of my family’s finances and allowed me to start building a much more solid financial plan.
More Income = More Happiness?
In 2018, FCAC conducted a study of 1935 Canadian residents. The survey results allowed the researchers to describe Canadians’ overall levels of financial well-being and to identify components of the financial well-being model that are most strongly related to financial well-being.
When I read through this report, there are two key ideas that are relevant to this blog post:
Quotation #1:
“Financial well-being is more strongly related to behaviours than to economic factors.”
Quotation #2:
“The fact that there is little change in financial well-being across most income groups* is consistent with the finding that other factors, such as behaviour, have a greater impact on financial well-being. This finding is striking because it is counter-intuitive and contrary to many people’s beliefs that higher income alone always leads to greater financial well-being.”
(Side note for the above* :
the ‘most-income groups’ being referred to in this finding include those with incomes between $50,000 and $150,000 which is exactly where most teachers land).
In this series of blog posts and in my online courses and workshops, I want to identify important financial concepts and offer you some ideas about how you might incorporate these into building your own financial plan.
For me, using better financial knowledge has allowed me to build my financial plan and my sense of financial well-being. I hope the same will be true for you.
A Teacher’s Pension is Not A Financial Plan: It is a Component of a Financial Plan
Most people are wowed by the concept of the teacher pension.
(Side Note: Do you share my observation that, especially after our experiences with pandemic home learning, few of them are similarly wowed by the possibility of actually becoming teachers?!)
The reality is having a defined benefit pension , which is considered the gold standard in the pension world, puts us far ahead of most Canadians.
But I also believe it can lead us to a very ill-informed sense of financial complacency.
We’ve all felt the effects of increasing inflation over the past five years.
Using the Bank of Canada’s Inflation Calculator, I found that the same $100 basket of goods that I would have purchased in 2019 would cost me $118 dollars today. That’s an average annual rate of inflation increase of 3.38%.
Although I’m certainly not thrilled with all the details in our latest contract, I was relieved to know that we have a pay increase coming. It will certainly help with so many of my expenses that have gone up significantly since our last contract was signed.
But consider this: If we were retired and relying on our Nova Scotia Teacher’s Pensions, our payments would not be going up at all.
Why?
Because our pension fund is currently underfunded (75.1% as of December 31, 2022) and we have a Variable Indexing Rule which means that if the NS Teacher’s Pension Plan is less than 90% funded, no Cost of Living Allowance (AKA: COLA) will be granted.
So retirees are facing the same inflation related increases in costs but will not currently receive a linked increase in their pension payments.
And, at a funding rate of 75.1%, it is quite possibly going to be a few years before those COLA increases will start again but, even then, they will just start from the pension payment a retiree is receiving in that future year.
This means that the pension payments will not be retroactively adjusted to get caught up, instead, they will be adjusted from the retiree’s pension payment at that time.
This is not super.
For me, it is a call to overcome any complacency I might have about having a teacher’s pension and a strong reminder that a teacher’s pension is only a component of a solid financial plan.
Good News: We Have an Opportunity Ahead of Us This Summer
One of the reasons I have launched this initiative now is to foster some conversations around how to leverage our upcoming retroactive payments to do some long term financial good for NS Teachers.
Through my blog posts, workshops and online courses, I will offer up some ideas that might work for you as you build your own personal financial plan.
In fact, the first online course I am offering through Thinkific is titled If I Had A Thousand Dollars - A Financial Workshop for Nova Scotia Teachers.
Interested in coming along on this journey?
Follow me at debrawilsonfinancialeducation.ca
© 2024 DEBRA WILSON FINANCIAL EDUCATION
THIS BLOG POST IS PROVIDED FOR INFORMATIONAL AND EDUCATIONAL PURPOSES ONLY. IT IS NOT FINANCIAL ADVICE OR INVESTMENT ADVICE, A RECOMMENDATION TO BUY OR SELL ASSETS OR SECURITIES OR TO INVEST THOUGH CERTAIN INVESTMENT VEHICLES, NOR ANY OTHER KIND OF PROCESSIONAL ADVICE. DEBRA WILSON FINANCIAL EDUCATION WILL NOT PROVIDE ANY FINANCIAL ADVICE OR RECOMMENDATIONS TO YOU. YOU ALONE WILL BE RESPONSIBLE FOR YOUR OWN FINANCIAL AND INVESTMENT DECISIONS AND DEBRA WILSON FINANCIAL EDUCATION WILL NOT CONSIDER YOUR FINANCIAL SITUATION, INVESTMENT KNOWLEDGE, INVESTMENT OBJECTIVES, SAVINGS OBJECTIVES AND RISK TOLERANCE. DEBRA WILSON FINANCIAL EDUCATION DOES NOT PROVIDE FINANCIAL, LEGAL, TAX OR INVESTMENT ADVICE OR RECOMMENDATIONS. CONSULT WITH YOUR PROFESSIONAL ADVISORS BEFORE MAKING ANY DECISIONS OR TAKING ANY ACTION BASED ON THE INFORMATION CONTAINED HEREIN.
References
https://www.bankofcanada.ca/rates/related/inflation-calculator/
https://www.nstpp.ca/members/your-retirement/cost-living-adjustment/variable-indexing-rules