When people think about investing, they usually have physical capital in mind. They go to work, save up their money, and invest it in an instrument that follows a company stock or some combinations of shares on the market.
It’s a great tool that you can use to ratchet up your wealth and achieve financial freedom, but the returns you usually get pale in comparison to investing in yourself. It turns out that your ROTH IRA is not your ultimate investment vehicle. Instead, it is your body and brain.
Degree choice is becoming increasingly important. While those who study humanities often get a rude awakening when they reach the job market, many others find themselves in high demand. The economy is crying out for people with the right skills.
The returns to education can be substantial, but you need to choose the right course if you want to benefit. People who earn a degree can often look forward to making an extra million dollars throughout their lives. They’re then free to invest them, magnifying their gains with compound interest over the course of years and decades.
The question for many students, though, is where to invest their efforts?
The Type Of College That You Choose Appears To Be Key
While the returns to higher education are positive all over the world, where you ultimately decide to study can have a significant impact on the overall amount of extra money that you make. Colleges higher up the league table tend to perform better.
Of course, none of this is set in stone. You could attend a low-ranking university and still do exceptionally well in your career, but the statistics do appear to favor the more prestigious institutions.
The debate, of course, rages as to what precisely is causing this. Do these colleges provide better education and, therefore, enhance the market value of their graduates? Or do only the best graduates get into top colleges in the first place and carry their positive characteristics with them when they enter the workplace?
The truth is that it is probably a little of both. The highly accomplished get places at the top universities, and then the universities lend them their prestige when they enter the job market. Combined, these two effects mean that the people who invest in themselves by getting a decent education, dramatically improve their earning power in the real economy.
The Type Of Degree You Choose Matters Too
Today, college students have to be very careful with the degrees that they choose. The world is changing fast, and so too is the type of work that people do. Thirty years ago, you could still expect to have a job for life, but with the march of technology, that no longer appears certain. Innovations will likely replace vast swathes of the workforce so that by the time the majority of graduates are halfway through their careers, they will have to switch.
There’s nothing wrong with choosing a career that you know will come to an end, but it may mean that you have to retrain in the future, cutting into your returns from education. Savvy students, therefore, are going into areas that will build the skills that machines probably can’t replace.
One area that looks particularly promising is that of environmental science. Both governments, industry and the media want to know about the effects of chemical exposure on the human body. They need people who can evaluate water supplies, products, and the atmosphere and determine whether they are a hazard to human health or not.
Another area that looks ripe for growth is that of data analysis. Companies need people who understand how to use data for commercial advantage. Right now, there aren’t enough workers with the skills to fill all the roles in the economy.
The Returns To College Education
If you thought that 10 percent returns were good, then just wait until you see what you can expect from a college degree. Over the course of a 30-year career, you could see upwards of a 1,000 percent return on your initial investment, much higher than a 10 percent return year on year.
The ultimate effect will be that you will wind up in a much better financial position come retirement that had you worked in a non-degree job. You’ll also have to make fewer sacrifices along the way too. You’ll have more holiday opportunities and be able to live in a better home. You may be able to take more holiday and work fewer weekends too, enhancing your overall quality of life.