5 Ways Education Can Impact Your Net Worth

Education and Wealth Go Together

Most of us have probably heard some variation of this advice before: “Get a good education so you can get a good job and have a successful career”. It’s been a standard approach for years, where many well-meaning parents and other elders encourage younger people to build their foundation with a solid education.  In other words, get an education to increase wealth down the line.

However, the tried and true advice about getting a good education has been questioned of late. We discussed this in a post on college vs. entrepreneurship, debating the notion that college might not be worth it these days, it’s not for everyone, and that many people could be fine without it in this current environment.

Clearly, based on what I wrote in that post, I don’t agree that college has become less necessary. Rather, I believe that a good, solid formal education has become more important than ever, and included it as one of the top ways to grow and protect your net worth.

Sure, some people are entrepreneurs that strike it rich based on risk taking and innate business sense. And yes, some people do burden themselves by going to unnecessarily expensive schools that offer a poor potential for high ROI. Nevertheless, I think its great advice for a young person by recommending they focus on getting a good formal education.

Here are 5 reasons I came up with to support the notion that a good, formal education is worth investing in:

  1. College graduates make more money.  This has been documented over the years. Over a lifetime, this can truly add up to a substantial difference in net worth.
  2. A college degree is required for many jobs.  Many white-collar, professional jobs simply require an undergraduate degree as a minimum screening criterion. If a person doesn’t have a degree, they probably won’t get a chance to enter certain fields at all. Often, the requirement is to have a graduate degree as well. If you don’t have a degree, you might not get a chance to play the game – and might hit an early, low plateau even if you do get an entry-level chance.
  3. A college degree helps shape your personal brand.  Where you go to school can – for better or worse – play a role in getting into graduate school, getting certain jobs, and connecting with other people. It helps tell a story about you, and gives people a base level of confidence in your ability to show ambition and hustle.
  4. A formal education teaches you how to critically think.  Often times, the specific skills we learn in school are never used, but we develop the skills of critical thinking and learning how to keep on learning. I had a former college friends mother ask me, years ago after I graduated, if I was using the specifics I learned in college in my first job. I said no, maybe 5% of the skills carried over, but I’m so glad I had the education. She looked at me puzzled, like I was crazy, and asked me how I could be glad for the education if I don’t use the skills I learned. I told her that I wasn’t applying very many skills I learned directly in college, and learned most things new on the job. However, without my college education – even though there was minimal transfer of skills from my degree and stuff was all new – I never would have been able to be prepared to do this job without my degree and education. She didn’t get it, as she clearly didn’t understand the concept of learning to learn and having intellectual context.
  5. You form a network of other professionals.  It doesn’t matter what you do, nor does it matter if you aspire to make a lot of money. The bottom line is that the people you meet in school, as well as other alumni from your school, can help open opportunities to network, learn, bounce ideas off each other, and possibly find work.

Overall, the way I see it, it’s important to convey to younger people that a good, solid, formal education can help put them in a better position to grow their net worth over the course of their lives.

My Questions for You:

Do you agree with the notion that a formal education is truly necessary in this day and age?

Do you think that those who dismiss college for entrepreneurship are being shortsighted and caught up in get rich quick hype, or do you think that things are changing?

How has your level of education impacted your career, income, or other aspects of your financial life?

Comments

  1. says

    I think a lot depends upon the line of work. Bill Gates and Steve Jobs didn’t think a college education was necessary. And on the other end of the spectrum we have dumb politicians with multiple degrees preaching to their base college degrees are evil!

    One area where college degree is useful is the opportunity it provides to meet like-minded people – networking.

    • Squirrelers says

      MC – it does depend on the line of work to some degree, but when the line of work disappears, the person with a college degree will have a broader set of option to consider. Most likely, anyway. As for Gates and Jobs, they are the examples given by the college isn’t necessary crowd, but let’s face it: 99.99% of people whether they have a degree or not will not be that successful.

  2. says

    After watching my cousins and brother struggle to find their way at my age, and the fact that I’m not even done college and already have a job paying more than any of them have EVER had, I think yes, college is still a great thing to have under your belt. Maybe it’s just a Canadian thing, but I think even moreso; if you don’t have an education or experience (which you typically get because you have an education) then it’s going to be a hard road.

  3. says

    I believe you need a post secondary education whether it is college or some othe rtraining. A high school diploma in itself is not enough. That post secondary training can ebe vocational, on the job or techical.

    • Squirrelers says

      krantcents – yes, I think that for most sustainable careers, a high school diploma will not be enough going forward. This wasn’t the case a generation ago, but it is today in my view for the most part.

  4. says

    I think education is a must in this day and age. You’ll always have a fall back if entrepreneurship doesn’t work out. College education is a huge step up from high school and you’re right that it teaches critical thinking and hard work.

    • Squirrelers says

      Joe – that’s the thing, the critical thinking and other skills that one won’t get in the same way otherwise. Education is key.

  5. says

    College education changed my life, and my world view. Sadly (I think), the dramatic increase in the cost of higher education over the last generation, which now makes big borrowing to finance college a necessity for the middle class and below, makes the question of whether college is ‘worth it’ a much closer call than it used to be. Student loans generally cannot be discharged through bankruptcy–they must be repaid. So one better feel quite sure these days that the education being paid for with borrowed money will pay off, literally.

    • Squirrelers says

      Kurt – You make an excellent point about it being a closer call than it used to be due to the skyrocketing costs. That said, it’s still worth it. Just be sure to choose wisely when finding a school, as costs and ROI really matter. You don’t always get what you pay for when it comes to college educations, as some that are less expensive can be a much better deal than those that are pricer and more “exclusive”. Young people need to be very, very careful with student loans.

  6. says

    Hmm, I don’t know if I would say it’s truly necessary in this day and age. I think it all depends on what someone wants to do with their lives, as it relates to employment/career. However, I will say that I have one friend, who does not have a bachelor’s degree, and I’ve seen her struggle in being able to even qualify for many jobs. So I do agree that, in many instances, a bachelor’s degree is needed to simply garner interest.
    I wouldn’t say that “all” future entrepreneurs are being shortsighted and/or caught up in the get rich quick hype. I would like to think that maybe taking a few courses in business (if the desire is not to pursue a full degree) or marketing would be of a benefit to an entrepreneur.
    My level of education has allowed me to qualify for some jobs, w/o experience, at a higher salary. Some entry-level jobs simply wanted to see that I had a degree (helps that I also have a master’s degree as well). Now I just need to pay off these student loans so I can feel a little better about these degrees!

    • Squirrelers says

      SPF – your last point about paying off loans is what I think drives many to question the value of the degrees in the first place. Great that you have a master’s degree!

  7. says

    I think your most important points are the networking aspect, and “A college degree is required for many jobs”. Truth is, you can’t get your foot in the door in many places without a degree, even if that was the case for a job a generation ago.

    Like the quote goes, “it’s not what you know, it’s who you know.” For many fields, you can get your foot in the proverbial door by networking on campus and even visiting companies at career and networking events… (that’s how I got my first job out of school, a job fair on campus).

    • Squirrelers says

      PK – yes, people can’t get a foot in the door in many cases without a college degree. The degree is assumed to be there, as part of the base minimum qualifications. What many don’t see is that we’re in a global competition for work in some cases, not just local as in generations past.

  8. says

    If by a “formal education” you mean getting a college degree, I would say that it’s not necessary, but it can definitely help and won’t hurt if you’re smart about getting it. I have a master’s degree, but it hasn’t impacted my career or income as near as I can tell. In fact for a while there my husband and I did the exact same job and he made more than me — without a college degree. I think college might have benefitted me more if I’d either go into the field my undergraduate degree was in, or gotten to know more people there.

  9. Squirrelers says

    Anthony – I agree with much of what you say. The one area I might see differently is that in many professions, it is simply required to have a college degree. With so many applicants, people can simply get screened out without ever getting a chance if they don’t have the “minimum qualifications” the employer is looking for. That said, I do get your point about being able to sell one’s skills, experience, etc. All very important indeed.

  10. says

    In the oil and gas industry, an engineering degree is not entirely necessary to gain knowledge, but an absolute must to attain certain positions. It just opens the door. Without it, you’ll *never* get there. For the company, it’s a question of liability. Having a non-degreed person do and issue process or structural calculations is asking for trouble.

    • Squirrelers says

      101C – great point about liability. How can they say that they have taken all measures to manage risk when they couldn’t even hire a degreed person? Not literally asking the question, but posing it in the way that others might. Also, to your other point, I think that concept of not needing a degree to get knowledge but to open doors is quite valid in many professions.

  11. says

    Anything I learned in college, I could have learned on my own. The question is whether the cost of “needing a college degree” to learn it was worth it. My finance degree got a cubicle in the finance industry for 2 years, I quit and haven’t looked back. It’s been nice having the knowledge for investing and passing out info to friends and family but hardly worth the costs.

    While your 5 reasons for a degree are accurate, the cost for that degree can exceed it’s worth. Take networking for example – dropping 20k/yr at a small private school doesn’t always offer the same networking abilities as a state university that may be half the costs.

    • Squirrelers says

      JP – Very true, dropping excessive money for a private school might actually provide less returns than what one might get at a big state university. More cost and less return can result in a very poor ROI. Thus, it’s not so much whether or not college is an option but which undergraduate choice is a better move.

  12. Selena says

    There’s actually nothing wrong with doing both. I am a student entrepreneur. I think about this: “What if the time comes when my business will lay off?”. At least being able to graduate college will be a back up if ever that happens.

    • Squirrelers says

      Selena – true, nothing wrong with doing both. I’d say if I was forced to pick only one, it would be education. But doing both seems great!

  13. Squirrelers says

    Cameron – I think that the ability to think and to learn is of course inherent, but it can be developed with practice and even skills while in college. Transferrability is there with this, and it can carry on through life.

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