In my Finance class at Fenger High School, my students and I do research each year to discover the reasons why nine out of 10 people will say they need to keep a budget, but less than two out of 10 actually will. I wonder if we asked teachers in September about their plans for to save for the summer of 2019, how many would verbally commit to saving, only to be stressing out in July as the last of the 40 pay periods hit. The first thing you should know if you’re struggling is that this is 100 percent normal. Studies have repeatedly demonstrated that people spend more as they make more, so even if you’re 14 years into your career near the middle or top of the salary schedule, no one should shame you for not saving as much as you wish you could. This goes double for so many of us who are raising children or paying off an exorbitant college loan debt.

History

I know lots of teachers who are clamoring to bring back deferred pay administered by the district. I absolutely think this should be an option, but I wouldn’t take it. The reason I wouldn’t is because I understand that when our pay was deferred, the district was able to earn interest on that money. There’s also a cost associated with the administration of deferred pay that I’m sure the school district wanted to avoid. My preference is to set up my own deferred pay system with a reliable, no-fee, high-interest account. I hope this article will help you do the same.

The good, the bad and the ugly of banks

Each year, my students research and compare banks and credit unions. They inevitably identify the worst and ugliest banks as the ones that hold most depositors’ accounts. What this means is that to get a good bank, you have to be extraordinary, just like one of the two out of 10 people who can actually keep a budget. Don’t fret. You can learn to be extraordinary!

First, a good bank has three characteristics:

  • No fees. The bank takes your money and loans it out to someone else for their house, car or business, making money on your deposits. You should never have to pay them to hold your money. It’s my personal opinion that you should never have to pay to use any ATM, either—ever. This is a feature available from a number of checking and savings accounts.
  • No minimum balance. There’s no reason why a bank should compel you to keep any amount of dollars in your account. Unless we all have $100,000 to park in a savings account like the ruling class, there are no bank accounts that are worth the minimum balance.
  • Interest. For the same reason you should never pay a fee, a bank should pay you interest.

The set-up

First, research and identify a decent savings account. I like to use the website nerdwallet.com.

  1. Enroll with the bank. Usually this will be an online bank that can offer a higher interest rate precisely because they’re not paying for the branches, personnel and marketing that big boys like Chase and Bank of America are paying for. My wife and I use Barclay’s Online Savings, which offers an attractive 1.75% APY.
  2. Connect your checking account to your savings account. Use your checking account where your paychecks are deposited to your savings account. Have your checking account number and routing number with you, and be prepared to note the confirmation deposits that the bank will use to confirm that this is your account.
  3. Set up your bi-weekly or monthly savings. For most banking, you’ll have to set up these transfers. My recommendation is to start with a small amount and slowly increase the amount as the months go by to save as much as you can while still paying for your regular monthly expenditures. In addition, when we get a pay increase, as all of us will this fall—and some of us double if we still have steps to move up—it’s useful to increase the amount you are sending to your savings.

Final advice on securing your deferred pay

I should admit that my wife (also a Chicago Public Schools teacher) and I take money out of our savings when we need it, even if that is during the year. Sure, we try to avoid it, but sometimes we go a bit overboard on one of our credit cards and need to take from savings to avoid paying the ridiculously high credit card interest rate. The key is to not quit even if you have a setback. Continue saving in that account, even if you have to withdraw every now and then. My wife and I do take some measures to make it a bit more difficult to access our savings. For example, we do not sign up to receive a debit card with our account, meaning the only way we get money is a transfer back into our checking account.

I should also note that savings rates have been increasing and are predicted to increase in the future. So now is a great time to lock into a savings account at a bank like Barclay’s that will raise your interest rate when the Federal Reserve decides to increase interest rates.

I hope you decide to set up an account like this. The whole setup shouldn’t take more than 30 minutes and if it does get complicated, a good bank should be able to help you over the phone. And although 1.x percent might not sound like a lot, it really does add up at the end of the year. As I tell my students, “Money is binary—you’re either earning it or spending it, so why not earn it?”

Dustin Voss is the CTU delegate at Fenger High School. If you’d like some individual help, or would like to see more articles in the CUT about teachers’ personal finance, feel free to reach out to him on Twitter @teachervoss.

This article appears in the September 2018 issue of the Chicago Union Teacher.

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