Money Talks At The British School at Jakarta
This week, I spoke at the British School of Jakarta.
I gave a series of student talks, speaking about happiness and money. Spending money on experiences, instead of material things, makes people happier. Giving money away has similar positive effects on our personal well-being.
I also gave three teacher-talks. In one, we calculated how much money we would need for our retirements. In the second talk, I spoke about effective, low-cost investing. The third was my favorite. I borrowed the title from my friend, Paula Pant: You Can Afford Anything, But Not Everything. I spoke about opportunity cost, showing how small decisions can have large financial impacts. Teachers calculated long-term opportunity costs based on a variety of scenarios.
For example, we started with the massages my wife and I received during 11 years in Singapore. We figured out how much we paid for our weekly massages, and then I asked the question: “What if we had invested that money over 11 years instead?” Teachers figured out the answer. Needless to say, it shocked them. The answer to my second question had an even bigger impact: If we had left Singapore after those 11 years, and then left that money invested (with no additional money added) until I was 65 years old, what would it have grown to if it received a compound annual return of 8 percent?” The answer was about $700,000.
This wasn’t to say that people shouldn’t have massages. My wife and I (despite the long-term financial cost) would have done the same thing again. My point, however, is that expats have to make decisions about the money they choose to spend. They can afford anything, but not everything, so they need to make choices. When they make smart choices, they can retire with a lot of money. When they spend too much, they might retire in penury–or not retire at all.
I also spent time one-on-one with different teachers. Most of the time, I showed them how to build their own portfolios of low-cost index funds. For those that wanted a professional advisor to build portfolios for them and provide financial advice, I provided contact names and numbers.
As is usually the case when I visit international schools, some of the teachers were in great financial shape. Others were struggling. That’s one of the most fascinating realities of expat life. We have to float our own financial boats. Small decisions can have really big impacts. And as I said in my presentation, we only know who’s swimming naked when the tide goes out. That tide, in this case, would be sixty years of age. That’s when teachers at The British School at Jakarta have to leave their posts. They can’t continue working beyond that age.
Fortunately, the savings potential is fabulous at this school. Ironically, I believe most international teachers (regardless of their pay package) retire with less disposable income than the teachers they leave behind in their home countries. Teachers that pay into Australian, New Zealand, European, British and Canadian defined benefit pension schemes end up with much more disposable income than the typical expat teacher. Americans that contribute to Social Security and an IRA or a 403(B) usually end up with much more disposable income than teachers that work abroad.
But it doesn’t have to be that way. Based on conversations I had with some teaching staff this week, frugal teaching couples at the British School of Jakarta can save $100,000 USD a year. I spoke to one young woman who saves £48,000 a year. That’s $63,000 USD! Teachers receive a 25 percent annual gratuity above their salary. They also receive a generous housing allowance, allowing many of them to pocket the difference between their rent and their allowance.. Singles, for example, who find accommodation costing $500 USD a month can pocket $13,200 USD per year.
The school has great facilities and a fabulous faculty. Of course, no place is perfect. If clean air is really important, this might not be the school for you. But five years of savings, at a school like this, could tremendously boost your retirement potential.
However, as with any international school, teachers need to be careful. Some teachers save a lot. Others struggle to save.
If you’re behind the saving’s eight ball, or if you’re a new teacher who’s keen to pay off debts, this might be the school for you. Contact the Operating Director, Kerrie Weippert Rowe. She might accept your resume.
But always keep in mind: savings potential isn’t the same as savings.
How much you save is up to you.
Video Courtesy of British School of Jakarta