Why aren’t more educators wealthy? The archetype of impoverished teachers is deeply embedded in American society. Why? Teachers are routinely identified as one of the most valued and trusted professions, and yet rarely do we see the financial success of educators celebrated.
Teachers, paraeducators, school nurses, and yes even school principals, provide a valuable public service. Too many of them struggle under financial stress or working longer than their passion can sustain them. I want to help change that.
9 Reasons Why Most Educators Don’t End Up Wealthy.
Income (The unlisted factor)
Before I dive into the list, I quickly want to address income so I don’t get flamed for ignoring it. Higher income makes wealth easier to achieve. But, there are plenty of examples of people with very high incomes ending up broke. Equally, there are those who earn less that manage to find financial independence.
The average teacher salary, according to this, ranged from $42,000 a year to almost $80,000/year with a national average of $58,355. I’m an active advocate for paying teachers more. In the FI community, there are many examples of people earning these salaries or less and still reaching their goals. This article focuses on other factors that keep educators from reaching financial independence. While we fight the overall societal issue of pay, let’s help each other improve what we can control.
1. It’s Not About the Money
Seriously. It isn’t. You will hear this all the time if you work in education. The profession is filled with people who have chosen to pursue a passion, often giving up other more lucrative work. This is true for me. When I switched professions to teach, I immediately took a 30% paycut. While I’m doing just fine, I don’t let myself think about the earnings I gave up over the life of my career. I don’t regret it, because it’s not about the money.
This phrase also comes out when an educator spends their own money to outfit their classroom, provides support to a family in need, or takes a cut in hours or pay when budgets shrink. I avoided the typical framing of this topic as “9 Reasons Educators Are Broke” because few are. They figure out how to make it work and see it as worth it for the job. Not being broke, is nowhere near being financially secure.
There is no such thing as a universal truth. But, those who are driven by money, wealth, or financial reward are most likely to choose another profession. Purpose drives us, and if wealth isn’t your purpose it’s much less likely you’ll end up rich.
In fact, this single factor influences many of the others. It’s not about the money.
2. Student Loan Debt
Teaching has education barriers to entry. At a minimum, most teachers are required to have a four-year degree to get in the door. Many states require a Masters degree either initially, or within a set number of years entering the profession. Additional certifications, or the career ladder of education administration, require still more college education. Some steps require a doctorate.
The education costs relative to the potential earnings is sky high. These aren’t medical school costs, but the upper bounds of income are not remotely competitive with the medical field. (Remember – it’s not about the money) It is unlikely that an educator will end up with hundreds of thousands of debt, but impossible that they will ever earn north of $500,000/year.
I don’t have a research source to back this up, but anecdotally I also believe that teacher candidates are less likely to come from wealthy families. Or, perhaps a better way of saying it is that higher income families are more likely to encourage their children to pursue more lucrative careers.
The debt burden, combined with low starting pay, make it harder for educators to start saving and investing early. And we know how critical the money + time equation is for wealth accumulation.
3. No Financial Training
I mentioned how much college is required, right? In all of that schooling, I did not take a single personal finance course. Not. One. Not only is it not required, it’s not even talked about. (I did have to take a school finance course as part of my administrative certification, but don’t get me started on how useful that was…)
Lack of personal finance training is a troubling oversight in education for a number of reasons. How great would it be if we supported our educators by teaching them about alternatives to high debt load or the ability to manage it as they started a profession with low entry-level wages? What about giving them the skills to reduce the stress of personal finance and enable them to focus on the critical job of educating our nation’s students?
Perhaps the biggest missed opportunity of all – our students are heavily influenced by their teachers. Teacher knowledge and attitudes about subjects and life transfer to their students. Imagine if we had financially literate educators in front of our students, modelling good financial habits and attitudes!
Of all the factors on this list, this one troubles me most – because it is so fixable!
4. Counting on Pensions
Retirement? I don’t need to pay attention, I have *insert state pension system here.*– Too many educators
Many teachers assume that their public pension will take care of them. This is not a good idea.
This is one area where we have, generally, tried to take care of our educators. A public pension is a nice benefit. However, it should not replace financial planning.
Funding levels are very low in many states and pensions are constantly under scrutiny. In other states, the pension challenges have been dealt with by introducing new or reduced tiers of benefit. In my current district, the teacher pension benefit is far closer to a pure 401k than the golden defined benefit systems that many educators anticipate. I truly fear for our young educators coming out and counting on a pension.
This blind trust in pensions also keeps many from thinking they have to save anything. Even if this were true, no one should be forced to wear golden handcuffs. Of course, no pension is a replacement for savings. How to factor a pension into financial independence planning is a whole separate post.
What doesn’t require a whole post to say is:
Even if you are fortunate enough to have a pension – you should still be saving and investing!
Related Post: 4 Simple Ways to Include a Pension in Your FI Plan
Time is an excuse for all busy people. Educators are busy.
This one may seem strange to non-educators who think of education as a “school hours” job with long summer breaks. In reality, it is the most consuming profession I’ve ever worked in. Most educators put in impressively long hours during the school year. Many teachers work extra jobs to supplement income, especially during the early years.
In those early years, when it would have been most valuable, my teacher partner (TFI) and I often found the days blurring with little energy to do anything else. Our friends stopped expecting to see us during the school year. We worked and slept, and studied. This was a choice, and it wasn’t healthy – but it’s not at all uncommon.
When I entered school administration, I was earning more, but had even less time. It wasn’t until I made a conscious choice to prioritize my finances that I overcame time as a barrier to financial independence. And that happened far later in my career than it should have.
If you haven’t been exposed to financial concepts, and aren’t really driven by money, are you likely to choose to spend your little available time on personal finance? You should – but that doesn’t mean you will.
This also leads to that infamous anti-wealth trap of “…I deserve it.” The biggest financial mistakes for TFI and I was lifestyle inflation and overspending on travel. And we used time to justify it. “We work hard, and never get time off…so let’s go to Hawaii during winter break.” Talk about an insane financial choice!
6. Societal Pressure
Educators are supposed to be poor in America. This creates both heavy societal pressure and a personal limiting belief.
Educator salaries are public record. In some communities your name and salary are published in local media. This is especially true for administrators. This creates a disincentive (as if there weren’t enough already) to climb the career ladder. Community members who are struggling, or anti-government types will use the information to attack you publicly.
Even among friends, it can be difficult to admit you are doing okay as a teacher. I recently read a post by Penny, of She Picks Up Pennies, that captured this well. You should go read it, so I won’t quote much. But, I have to share this small snippet “But I was immediately awash with doubt and guilt…” That perfectly captures how it feels to be an educator who admits to earning a livable wage.
It’s not just the pressure. That doubt and guilt have an effect on what you think is possible or right. It creates a limiting belief. Educators are supposed to be poor. Even supportive advertising is often about how much financial help educators need. We are public servants, dedicated to our students. If we are doing okay financially, we must not be sacrificing enough.
Again, the American archetype of a true educator is one who is impoverished for the good of school and students.
7. “Keeping up…” is a thing in all professions.
Keeping up…Appearances. With the Joneses. With the Kardashians.
Educators are not immune to these things. The same marketing that hits everyone else is also effective on a young teacher, an administrator with new extra income, or an exhausted school nurse looking to cope with stress.
I deserve it rears it’s ugly head. “I give so much to my students, I deserve to buy this.”
I cringe when I pull into a staff parking lot and see the luxury cars or new SUVs. Not because of the pressure from factor #6, but because I want them to make better financial choices. It’s too common. (And, I have to admit, I do believe it impacts their ability to connect with the community they serve. I support educators embracing the concept of stealth wealth! Here’s more on stealth wealth.)
Another example – I have a vivid memory of a colleague during my early years showing off a designer handbag in the lunch room. She and her husband were both teachers, just like my wife and I. I knew what we were making, and the handbag purchase seemed insane. A few weeks later, the district announced that we’d be taking a pay cut due to a budget shortfall. By the end of the year, she’d had her boat (a boat!!) and car repossessed.
“Keeping up” is toxic for educators, too.
8. Easy Prey
Remember earlier when I said that teachers were among the most trusted professions? Well, they’re also among the most trusting. Combine a desire to see the good in people, optimistic nature, and limited financial education and you have…the perfect market.
There are countless companies that market specifically to educators. Some of these are good actors, or at the very least want to be positively engaged with educators for the public relations benefit. Others, however are malicious.
Many financial services companies serve the educator niche. Some get into district benefit packages. When you look into the investment options you see crazy fees. A discerning investor may be able to find a single low-fee option. Often, there are none.
Others offer to administer a district benefit for free in exchange for required meetings with all educators in the district. The agents may offer some financial support, but include high pressure upselling. Suddenly a teacher assistant asking for help with a 529 has a new insurance policy.
The student loan problem in #2? Well, there are several programs that benefit educators with loan forgiveness options. There are also a number of companies that pounce early to “help” educators with consolidation that then prevent access to those programs. TFI herself fell victim to one of these, costing us more than $20,000 in benefit over time.
It’s not only companies that take advantage of an educator’s desire to help. I’ve worked with educators that get caught up in individual scams. Some lend money to friends and family, or support a bad relationship for far too long. I’ve even seen teachers lend money to a struggling student’s family and lose it all.
These things are not limited to educators. But the same characteristics that lead one to choose education as a career can lead one easily into bad financial choices.
9. Not Taking Advantage of Career Benefits
While income is certainly a challenge for many educators on the path to financial independence, there are a number of career benefits that can be a support. These are not well known, well used, or talked about much in education circles. I’m hoping to change that.
I plan to write more on these, but for now here is a quick list:
|Potential Educator FI Supports|
|Teacher Loan Forgiveness Program|
|Public Service Loan Forgiveness Program|
|Paid college credits|
|Extra duty stipends|
|Certifications for salary advancement|
|Health Savings Account (HSA)|
|403b (educator 401k)|
|457 plan – FIRE magic|
|Defined benefit pension (careful!)|
|Career ladder to increase income|
It’s surprising how underused some of these advantages are. Even the ones that are used, could be used more strategically. An educator stacking these can make significant progress on the path to financial independence. If you are an educator with experience using work benefits to your advantage – did I miss any?
There you have it. 9 factors that keep educators from being wealthy. What do you think? Would you add any?
All of these factors can be overcome. Dedication to a noble profession and taking care of one’s personal financial well-being should not be mutually exclusive. Educators can reach financial independence.
Join me on this journey or let me know if I can help.
Hi, while my district doesn’t match the 10% that teachers in my state of Pennsylvania contribute to our pension system, I believe that they pay approximately 3% into our pension benefits. While we don’t have access to a 457, we do receive excellent benefits at a value of over $40.000 a year. There are definitely a lot of differences between the benefits and salaries teachers earn from region to region!
Yes, I made that comment in a recent interview. The variation by location is so high that it’s really important for teachers to understand the differences in benefits. Unfortunately, so few of us do that it’s almost a lottery.
Leif Kristjansen (@ FiveYearFIREescape) says
Keeping up is trouble for everyone. My wife worked as a school librarian and she lucked out by having her department be full of other frugal people which helped her with our savings goals.
She noticed that the math department on the other hand, was entirely full of big spenders. You spend a lot of time with your department fellows so they influence you a lot. Then it becomes a bit of a lucky draw about whether your department will help or hinder your savings goals.
We were lucky. I don’t know what the best solution would be. Change departments? 😛
Sorry I’m late, but I just happened to read this now. I love the article! I learned a few things about teachers outside of my own personal experience from school.
Your point about student debt really hit home. As someone who’s paying off student loans, I know how much of a drag it can be. However, comparing the costs of education between teachers and medical professionals with their respective returns was a great point. It’s tough knowing you’ll be taking on that debt without the same return as other professions – it takes strong commitment during college.
Also, couldn’t agree more with #3. I never had personal finance courses in school, and I had to learn the hard way. I often think I could have saved myself cash on top of headaches if I had learned more early on.
Rachel Scott says
Excellent read. I definitely think that educators need to become aware of their finances and can absolutely take more advantage of the benefits they have. However, it’s more than just the income and the 9 other factors you listed. Educators don’t have the same benefits as many other careers– specifically, I know from personal experience that I don’t receive any retirement contribution matching. I don’t know how every district handles this, but I work in a relatively well-funded district and don’t receive this, so I assume most others don’t as well. This causes a huge gap in investment potential.
You’re absolutely right that we need to take more responsibility for educating ourselves and other teachers. At the same time, we need to acknowledge that income isn’t the only systemic factor in this.
Principal F.I. says
I absolutely agree – it’s never just income, but a larger system. You’re right – I’ve never seen a 403b match in any district.
At the same time, there are some advantages educators have that other professions don’t. My health care benefits have been higher than many of my non-educator professional friends. (This varies by district, and especially by region. I’ve worked in union states.) Also, I didn’t even know about the 457 option until last year. That and a 403b lets us withhold twice the pre-tax savings of just a 401k – though, still no match.
Thanks for the comment. You’re right – it’s never as simple as a list.