I am writing this article on How to Save Money Teaching English in Korea to help new native English teachers in Korea to create a savings plan that takes advantage of the benefits of teaching abroad.
To start with,
What are the financial benefits to teaching English in Korea
As a native English teacher, you will receive a free furnished apartment or if you choose, a housing allowance. This is a major financial benefit to working in Korea because you won’t have to worry about the expense of paying for rent.
In addition, if you teach in public schools through EPIK or GEPIK programs, you will also receive the following bonuses:
- Settlement allowance 300,000 won
- Entrance allowance 1,300,000 won (EPIK) / 1,500,000 krw (GEPIK)
- Exit allowance 1,300,000 won (EPIK) / 1,500,000 krw (GEPIK)
- Severance pay 2,100,000 won (equal to one month’s salary, so it varies)
This comes to a total of 5,000,000 Korean won in bonuses alone, which is money that you didn’t have to put any effort into saving.
How to Save Money Teaching English in Korea
#1: Open up three separate Korean banking accounts.
One for your salary, savings, and expenses. Your salary account is where your paycheck will be deposited. Your savings account is solely for the purpose of meeting your savings goals and where you will pay yourself first each month. Your expense account is where your bills will be setup for automatic payment. Having these accounts will help you with allocating your funds.
#2: Make your first payment into your savings account.
When you receive your entrance allowance, don’t spend it. Transfer it into your savings account as your initial payment to yourself in full for 1,300,000 won. If you work for GEPIK, then you will receive 1,500,000 won.
#3: Invest monthly into your savings account.
As an American, you are exempt from paying income taxes in Korea for the first two year, so I suggest taking 30% of your gross earnings each month and transferring it into your savings account on payday. Do this before you spend on anything else. So, if your gross monthly salary is 2,100,000 won, then you should make a payment into your savings account for 630,000 won.
#5: Move money into your expense account to pay your bills.
Each month, you will need to pay for gas, electric, phone, cable & Internet. How much you spend on bills will vary. I would say set aside 300,000 won each month. You probably will not spend that much, especially in off months when it isn’t hot or cold enough to use the air conditioner or heated floors.
#6: Use the money in your salary account for everything else.
Based on gross earnings of 2,100,000 won, after you have paid into your savings and expense accounts, you are left with 1,170,000 won. But let’s factor in your health insurance and national pension payments, which would have already come out. That will leave you with 1,000,000 won in disposable income until your next payday. Out of your salary account, you can pay for transportation, make groceries, eat and hang out with friends, traveling around Korea, or what have you?
#7: Use your salary account for travel expenses, not your savings account.
If you plan to travel internationally, then you need to allocate a portion of funds from your remaining balance of your salary account. Why? Your savings account is so that you will have something when you leave Korea to invest into other things (more on that in a later post).
How Much Money Can You Save Teaching English in Korea?
If we add up your initial investment, severance pay, exit allowance, and your monthly savings contributions (630,000 won X 12), then your total savings for one year of teaching with the national English Program in Korea (EPIK) will be at least 12,260,000 won, which is $10,000+ USD.
You can save more depending on your lifestyle and spending habits, in addition to your actual salary. The salary used here is the average minimum starting pay for a new Native English Teacher without any experience.
However, I think this is an easy and reasonable savings goal so that you can both save a lot of money in a year and have a good time exploring Korea, in addition to traveling to neighboring countries during vacation times if you plan for it.
Are There Any Other Financial Benefits to Teach in Korea?
Yes. As an American, you can withdraw the money you contributed to and that your employer matched from the National Pension Service when you leave Korea. I have intentionally excluded national pension withdrawal from this savings plan.
In a later post, I will write about using the savings from your Korean pension withdrawal for a separate financial investment. Stay tuned.
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