A friend who is a elementary teacher in our local public school system recently told me that most teachers opt to receive their salary in 12 equal payments. However, they could opt to receive it as 10 equal payments, and then receive nothing over the summer.
I ran the calculations, and found that for a teacher earning 34k/year, it would save $144 to take the 10 payments instead of 12 and set aside 1/6th of their salary each month into a "summer savings" account earning 5%. Assuming a 3% salary raise each year, at the end of 30 years, that slight change will have saved $14,000! That's not chump change!
If you rolled the yearly savings into a Roth IRA, at the end of 30 years (assuming 10% interest), you'd have $34,000, tax free!
To make it even easier, most banks and credit unions will do this monthly deduction into a sub-account for free!
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