3 quick tips for starting the school year on the right financial track

Summer is winding down. A new school year is about to start. Can you hear the bells?

We’re not talking about school bells—although those will be sounding off soon enough.

No, we’re referring to those end-of-summer ‘financial wake-up call’ bells.

The reason for the wake-up call is the fact that many Canadians have been struggling financially.

Plus, inflation and higher interest rates haven’t been helping matters.

According to a recent survey, one-third of Canadians are currently not making enough money to cover basic monthly expenses, while 49% are within $200 of insolvency.

If you’re an education member that also happens to be a parent, this time of year can be demanding enough without having to stress about your cash flow.

If you also happen to be getting a pay bump, coming back from a leave (e.g., maternity/4 over 5, etc.) or have had a recent change in status to your contract (e.g., switched from full-time to part-time/occasional), there are also key financial details you’ll want to keep in mind going into the new school year.

That’s why we’ve put together 3 quick tips to help you start the year on the right financial track:

#1: Getting a pay increase? Here’s how to put that money to good use.

Whether it’s a result of contract negotiations or moving up the pay grid, it’s always great to know when a salary bump is on the way. But instead of deciding to spend it, how about putting it towards improving your overall financial situation.

Here are 4 ways to help you make that pay increase go the extra mile:

1. Determine exactly how much more you’ll be bringing in (after taxes, pension contributions, etc.): by taking the time to figure out the full extent of your pay increase, you’ll then have the much-needed perspective to decide a financial course of action that’s best for you.
2. Set goals for that extra money: while having perspective into how much your pay increase will impact your finances is a good start, setting concrete goals will help you to give that money a proactive sense of direction.
3. Create a budget (and stick to it): once your goals are established, the next step is putting together a budget to determine how much of that pay increase (plus any additional funds you can afford to contribute) will be divvied up to help achieve those goals.
4. Maximize your budget by leveraging government incentives (whenever possible): from buying a home to saving for your child’s post-secondary education, some big-ticket goals are made a little easier to achieve thanks to a few government perks (e.g., Home Buyer’s Plan, Canada Education Savings Grant, and more). Speak to a Financial Advisor to learn more.

#2: Take control of your debt.

According to the Educators Kickstart Challenge, 54% of education members have debt (other than a mortgage) they would like to get under control. Factor in all of the impromptu free time spent at home over the course of the pandemic, which has caused online shopping to double—making it far too easy for that debt to get further out of control, if you’re not careful.

To take control of your debt going forward:

• Build a debt payment strategy into the school year: Because it’ll be easier for you to stick to a stricter budget during those 10 months (when you’re busy working).
• Stick to cash/debit (versus credit) for spending: Studies have shown that people spend 15% more overall when they use their credit card for purchases. Going ‘back to basics’ with cash (and leaving the credit cards at home) will make it harder for you to make any hasty buys.
• Review your credit report: This is especially important if you’re coming off a summer of online spending. The more sites you’ve been using your credit card, the greater the risk of credit fraud. Reviewing your credit report at least once a year is a good habit to get into for building and maintaining your credit history.

#3: Get proactive with your savings goals.

One of the biggest financial wake-up calls to come out of the pandemic has been the importance of having some kind of savings to fall back on. The more proactive you can be when it comes to putting money away, the better prepared you’ll be to cover any planned and unplanned events that (may) come your way down the road.

Here are some key savings goals to start planning now:

• Next summer: If money has been the constant obstacle to achieving your summer goals, now’s the time to change that. How much do you need to save? Let’s say your goal is to put away $5,000. Divide that goal across 10 months. That’s $500 a month (or just under $17 a day). Definitely not impossible—especially once you’ve got your debt situation under control. If saving $500 a month is too steep for you right now, start with as much as you can comfortably afford. As long as you’re saving something at the end of the day, you’ll be well ahead of where you are right now.
• Pension buyback: If you’re returning from any type of leave, you may want to consider buying back pension credits to ensure you retire with your maximum pension benefit. If you’re a full-time education member paying into OTPP, a year’s pension buyback typically costs between $6,000 and $12,000. While that’s a sizeable amount of money, the good news is you have 5 years from the end of your leave to pay for it. Learn more about OTPP and OMERS pension buybacks.
• Emergency fund: Financial experts (including our very own Certified Financial Planner professionals) recommend saving enough to cover 3 to 6 months’ worth of expenses for any financial emergencies.

GICs, PACs, TFSAs, and more: here’s how to put your very own financial plan (and savings goals) into motion.

BONUS TIP: save those school supply receipts.
Thanks to the Eligible Educator School Supply Tax Credit, eligible teachers and early childhood educators can claim 15% of up to $1,000 in eligible school supply expenses. That adds up to a maximum tax credit of up to $150 a year.

Get on the right financial track for back-to-school (or any time of year) by starting with us.

While the upcoming school year may be filled with uncertainty, there is one constant you can always count on—Educators Financial Group. Since 1975, we’ve been helping education members through many challenging times over the years. Whatever financial questions you might have today or goals you have for tomorrow, our dedicated team is here to support you and your family, every step of the way.

Have one of our financial specialists get in touch with you today.