Building Wealth in 2018
August: The ROI of Education – Finding the Right Balance
Throughout our series on building wealth, we’ve discussed topics ranging from reducing unnecessary expenses to free up cash for long-term savings to alternative investment strategies, along with a few things in between. In this series, we are going to discuss some alternatives to affording college to fulfill career aspirations.
A generation ago, the cost of a college education was considered expensive, but a worthy investment. For example, in 1980, the average annual tuition (fees, room & board) at a public college or university was $2,500, representing 20.4% of men’s annual income or 51.8% of women’s. Fast forward to 2016 and the average cost of college in the U.S. has skyrocketed to $20,150; however, the median income rates have not kept pace with the rise in costs. This one-year expense, as of 2016, was equal to 51.8% of men’s median income or 80.9% of women’s. Multiply that by four years, taking into account the cost of education continues to rise year after year and tends to be higher in NH than the average U.S. rates, and you start to see how this has become a major issue.
As costs continue to rise and the lifetime value of a traditional four-year education begins to come into question, students and their families have begun to consider different career training alternatives. While traditional four-year college continues to be the right path for millions of students, and there are many options available for saving for college, especially if you’re starting early, you may also want to consider other roads to you or your child’s future career. Depending on your interests, skill set, and aptitude for learning, you may want to consider more affordable educational alternatives, such as online colleges and universities, community college, trade school, on-the-job learning, or a combination of these and other opportunities. From coding bootcamp workshops to internships, you may find that a nontraditional education may suit you best. Depending upon the path you choose, there is still the lingering question of how much will it cost and how will the expense be paid? For tips on saving for any type of education, check out our recent article with advice on long- and short-term savings for education. To build long-term wealth, it’s important to consider the ROI of every investment, including your home, education, and the education of your children. Though the question comes into play with much emotional weight, after all you don’t want to deny yourself or your children a fulfilling career they’re passionate about because the numbers didn’t quite add up when considering the cost of affording college to achieve that career, it’s important to at least have a solid understanding of the true costs and lifetime value. This will help you determine whether a higher-priced private college is a better fit than an in-state university, or whether it’s worth considering taking out loans to afford the cost of tuition.
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