Teaching has its perks because it gives you a huge sense of satisfaction when learners understand what you are teaching and they go on to achieve more than what you could have hoped for them. Teaching in China can be a lucrative market with 300 million Chinese wanting to learn English and many thrive for western education. Most wanting the English or American University style.
Chinese parents take education extremely seriously no wonder this is a growing sector. This has made teaching a desired profession and pushed up the prices for expat teachers in schools.
What are the options of how to get financial freedom as an expat teacher in China, and how to make use of your time in China to make the right financial decisions? It is likely you will earn more than being a teacher in the UK, you won’t be taxed as much and likely spend less because most items are cheaper in China, depending on where you go!
The teaching facts:
- The average teacher in China stays for 5 years
- Teachers being in demand and many countries offering a higher rate than you would get back home teachers stay abroad for 15 years.
Seeing this means that teaching in China has higher salaries, with an average lower cost of living and expenses which leaves you with the option to invest or the ability to save for retirement and bulk up your pension. So what financial practices can you put in place while you are abroad to make sure that when you return home, you can be financially free?
Should I invest in property in China?
I have done a whole guide for buying a property in Asia. I would not recommend getting into Chinese property for a whole lot of reasons. Read the full article here
- Stagnation in growth in the Chinese GDP compared to what it was 10 years ago.
- Properties prices, in general, are quite high compared to other world cities of similar growth.
- The quality of the property won’t be as good as you would be used to back home and expect to be paying for repairs and in extreme cases falling down. Watch this.
- The supply is higher than demand. Ghost towns are typical.
- The 99-year lease, the Chinese government has the right to take the land back at any time.
I am not saying that you can’t make money off Chinese property, just be very careful if decide to invest. Make sure you do a lot of research on the property, construction company and the surrounding areas.
How to get money out of China?
This is one of the biggest questions that I have been asked. How do I get money out of China so have written a full article on this topic? This is very tricky because China uses WeChat for everything and it is not as simple as transferring money out of the country.
It is important for your wealth that you don’t keep a lot of money in China, this is because it is hard to get out, the currency swings it has a lot of debt. If it is in China, it is also much harder to access western investments and pensions. If you choose an offshore bank account to store money and put money in to, you will open up a range of investments and it will be portable if you move to another country to teach. By offshore, we mostly mean places such as the Isle of Man.
How to bank in China?
WeChat & Ali pay. These are the unofficial banks of China. But, I wouldn’t recommend keeping too much money in RMB due to the debt level that China presently has and still not being a stable currency. I would only keep your living amount of wealth in China and have other wealth distributed around in other bank accounts.
- Have a local bank account- Living abroad expenses
- Have on back home- for back home expenses
- Have an offshore account- for savings
Further reading I have done an article on offshore accounts
What is the best Bank account?
In China, I found ICBC, SPD to be some of the better banks in China with English speaking staff in major cities. But all the big banks seem okay, stable, and have a good level of service.
For expats Banks
HSBC expat and banking in Hong Kong is an option. Read my article on HSBC review.
What are the costs of living in China and will it be enough to live on and save?
Firstly, the biggest experiences are rent no matter where you live in China this is usually covered with the contract or at least heavily subsidized. So this takes a big portion of your outgoings. If you take that money and invest it into your pension or portfolio you can start to build up your pot and compounding interest. This is not a get rich quick scheme and will take years of saving and investing.
The cost varies dramatically across China, in Shanghai, Beijing, Shenzhen it is high, these are some of the highest on mercer list (a list to calculate how much it costs to send employees overseas).
Health care amounts up as an expense and it always good if you have it included in your package as a teacher, again if you calculate that saving and then put that in to your pensions and/or investments as above it will quickly start to build.
As well if you have children (and school is not provided for them) international schools are among the highest in the world, if you can get this in the teaching package then this will save you a lot of money.
It is possible to live on a budget?
Yes, I know many teachers in various cities in China that live on a budget and still manage to live a good lifestyle.
So it is easily done to live cheaply and save as a teacher in China here is a guide for prices.
https://www.numbeo.com/cost-of-living/
What do I get teaching in China that I don’t get back in the U.K.?
1. Teaching isn’t the most lucrative occupation back home, but back home the pension benefits are substantial. It isn’t usual for a teacher to get a pension of 17,000-20,000GBP, in addition to the state pension of around 10,000 pounds. To put that in perspective, a teacher earning 27,000-30,000GBP in retirement would need a retirement pot of over 1M GBP if they did it privately.
2. Teachers overseas in international schools usually have bigger salaries, but fewer pension benefits. This makes saving, and saving from a young age, important, for expat teacher to ensure you have parity or better with your peers back home. If you are 30, investing $500-$800 may be enough to provide you with a good retirement come 60-65. If you have left it until age 45, in comparison, you may need to invest $1,500+
3. Unlike expats in oil and gas etc., teachers can often get at least part-time work at 65 or even 70. An expat teacher who is 65 needs to carefully consider how they will fund retirement, including part-time income. Nobody knows when their health will go, so this shouldn’t be an excuse for a younger expat to delay, but if you are in this unfortunate position, you need to see much your current pot could be worth on a monthly basis and then decide how many hours you need to work.
1. Health Insurance
Your employer should provide this. However, almost all insurers for expats, won’t cover pre-existing conditions at a reasonable rate if you haven’t already been insured through them. In other words, if you have a contract in 2018 and are insured by AXA through your company if you lose your job in 2020 and got cancer or a heart attack in 2019, you won’t be able to easily get insurance to cover those conditions unless you are part of a group scheme. So spending 1%-2% of your insurance on your own health insurance makes sense.
2. Income protection due to ill health
The average age for expats claiming illness insurance is 43-44 in Asia, not 54 or 64! Oil and gas has its stresses just like all jobs, but also some specific threats to your health. Like on health insurance, protecting your income if a disability or serious illness occurs, can be incredibly cheap, provided you don’t already have pre-existing conditions.
3. Life cover.
If you have kids or dependents such as elderly relatives or a partner who doesn’t work, you need life insurance. Insurance though is dead money if nothing happens. Therefore, it makes sense to get as many benefits as possible, for the lowest possible price. If you can get your income, life, and health insured for 5% of your income, it is a no brainer and helps you sleep at night.
4. Income
If you are 55+ and are thinking about retirement, you should think about how your investment portfolio (which is hopefully relatively big by now) will fund your retirement. What income options exist?
6. Your current pension or savings
How well is it performing? Do you have too much money in the bank earning close to 0% or an underperforming portfolio? Could this be performing better outside of China?
For people interested in investing in options for expat teachers living in China, email info@investmentsforexpats.com , or you can use the chat function below. I try to get back to as many as possible.
Steps To Become Financially Free As a Teacher
- Read these two books, The Richest Man in Babylon & The Millionaire Next Door. Why? These aren’t your typical ‘get rich quick’ books, they teach you about investing and to understand the power of compound interest. The Richest Man of Babylon is based on a true story many years ago where he invested just 10% of his wealth over many years.
- Speak to an advisor about your situation, any previous savings, pensions or investments, and what disposable cash you have and what you need to live.
- Create a personalised portfolio that you review each year to make sure that itis right for your situation. You can be more aggressive in your younger years rather than when you get older
- Choose a platform you’d like to invest, understand the benefits of investing in the U.K and offshore, and why it might be beneficial to invest offshore to save your taxes!
- When choosing a platform or investments, please look and understand the fees, 5% of £100 doesn’t sound a lot but when you are paying that on £500,000 it’s a different matter. Ps you shouldn’t really be paying 5% management fees, there are some investments that charge 5% at the start but advisors shouldn’t charge that.
- Contribute a monthly amount and sit back and relax. If you save more one month or get a bonus, it is wise to think about putting some or all in your account so that it gets more and more every year!
When you are working abroad in China as a teacher you are earning an extra 20% on average without the need to pay taxes (20-35%) of your income and rent 20% of your income this shows that the average overseas teacher is 45-60% better off on disposable income than back home. But, you aren’t putting to a pension plan of what the average teacher back home of 8-20%. With this extra income.
The magic of compound interest, the average teacher in China earns around $60,000 per year. If you were to put a 10th of this away each month at the age of 35 for 25 years until retirement at age 60 (most teachers don’t retire until 65) you would have a pot of $407,971.10. This is nearly 7 times the average retirement pot of what someone has in the U.S. today. And more impressive is that you would have only put in $150,000. This an extra 257,871.10 in compound interest at 7% a year (the average equities return). Would you consider saving more in order to raise that number?
