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The question of whether a college education makes sense in this day and age isn’t an easy one to answer. Indeed, when investing giants like Warren Buffet have difficulty answering the question of whether a university degree will pay off over time, you know the average person may have even more trouble trying to answer the question.
Measuring the return on investment (ROI) of any big transaction is what most long-term investors try to do. In the case of higher education — where costs seem to continue to rise on an annual basis, and the benefits of said education are less easy to quantify — the decision can be daunting.
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In a 2020 interview with Yahoo Finance, Buffett pondered whether the four years he spent in higher education ultimately had the return on investment he was hoping for. After all, he noted most of his learning came from reading, and that reading typically took place outside the classroom.
Let’s dive into what to make of this conundrum, and what millions of Americans may want to consider before they, or their children, make the decision to attend college or not.
Personal balance sheets matter
Thinking about your household as a company with a balance sheet is an excellent way many experts suggest framing big life decisions. Whether it’s the Brookings Institute or many financial planners, assessing how your assets (like houses, cars, and other tools for life) correspond with associated liabilities (insurance, taxes, operating expenses) is something to think about.
Higher education is a big up-front investment in an individual’s personal balance sheet, and comes with a very large price tag. The question, then, is whether the tens (or hundreds) of thousands of dollars one spends on a degree, or two, or three, makes sense in this day and age.
If you’re a parent looking to invest in your kid’s university education or a student looking to get a better handle on your school debt, College Avenue is here to help.
College Avenue is a financial services company specializing in private student loans and student loan refinancing. You can get flexible and customized loan solutions to help you finance higher education with ease and efficiency, with no hidden fees and competitive interest rates.
To find out more about their flexible loan options, simply complete their quick online application (it only takes a few minutes!) and be sure to take advantage of their tools and resources to help both parents and borrowers like you understand and manage student loans.
As Buffett says in his interview, whether you opt for university or technical training really depends on the individual, and the school one chooses to attend. And, he noted, “there’s a lot you can learn in those four years.” That’s the whole point, after all.
Read more: Warren Buffett used 8 solid, repeatable money rules to turn $9,800 into a $150B fortune. Start using them today to get rich (and stay rich)
Start saving now
For those who want to invest in their kids’ education and future, saving money is crucial to avoid the crippling debt that student loans can create.
Whether you’re trying to save for your kid’s education or you’re trying to build up your own college fund, starting early can provide the best benefits over the long-term, thanks to compound interest.
There are many ways to put some hard-earned capital away for education expenses that are worth considering.
CDs (certificates of deposit) are a type of savings account that pay a fixed interest rate on cash you save for a set period of time, so you have the chance to earn high interest on your education savings.
Another option is a high-interest savings account. A Wealthfront Cash Account can be a great place to grow your money, offering both competitive interest rates and easy access to your cash when you need it.
A Wealthfront Cash Account can provide a base variable APY of 3.50%, but new clients can get a 0.65% boost over their first three months for a total APY of 4.15% provided by program banks on your uninvested cash. That’s over ten times the national deposit savings rate, according to the FDIC’s November report.
With no minimum balances or account fees, as well as 24/7 withdrawals and free domestic wire transfers, you can ensure your funds remain accessible at all times. Plus, Wealthfront Cash Account balances of up to $8 million are insured by the FDIC through program banks.
Invest with your goals in mind
Managing your major investments in both career progression (and financial assets) is certainly an important piece of the puzzle.
While the average college graduate earns roughly 86% more over their lifetime compared to their peers who stopped at graduating high school, they are also much less likely to be unemployed, according to a recent study from the Foundation for Research on Equal Opportunity. Their research also shows that nearly half of all master’s degrees have a negative ROI.
Thus, while Warren Buffett did get his master’s degree (and it certainly looks like this decision paid off for him, the math is clearly different these days.
Instead of pursuing a six-figure degree, many who may choose to apprentice for a trade out of high school and start making $80,000 per year within six months may be better suited over the long-term, and may be much more easily able to save up for a down payment on a house, for example, and start investing.
The hope for college graduates is that the relatively higher salary one might earn over their lifetime will more than make up the difference, and they may end up in a better position over the long-term.
In either case, diversifying one’s personal balance sheet and investing in assets that can grow over time is important for every investor, at every stage of life. In order for investors to have a shot at making it into the top 10% of society (which owns around 93% of all equities according to recent estimates), investing in the stock market has proven to be an excellent tool to move up the economic ladder.
If you’re keen on expanding your investing knowledge, there are more resources than ever to help investors make informed decisions. For instance, platforms like Moby, founded by former hedge fund analysts, offer stock research and insights tailored for everyday investors.
Moby’s stock picks have outperformed the S&P 500 by an average of 11.95% over the past four years, helping over five million users identify promising investments before they take off.
Consider alternative investments like real estate
Real estate has long been considered a reliable hedge against inflation, thanks to its intrinsic value and income-generating potential.
When inflation rises, property values often increase as well, reflecting the higher costs of materials, labor and land. At the same time, rental income tends to go up, providing landlords with a revenue stream that adjusts for inflation. This combination makes real estate an attractive option for preserving and growing wealth during periods of escalating price levels.
In 2022, Buffett stated that if you offered him “1% of all the apartment houses in the country” for $25 billion, he would “write you a check.”
New investing platforms are making it easier than ever to tap into the real estate market.
For accredited investors, Homeshares gives access to the $36 trillion U.S. home equity market, which has historically been the exclusive playground of institutional investors.
With a minimum investment of $25,000, investors can gain direct exposure to hundreds of owner-occupied homes in top U.S. cities through their U.S. Home Equity Fund — without the headaches of buying, owning or managing property.
With risk-adjusted target returns ranging from 14% to 17%, this approach provides an effective, hands-off way to invest in owner-occupied residential properties across regional markets.
If you’re not an accredited investor, crowdfunding platforms like Arrived allow you to enter the real estate market for as little as $100.
Arrived offers you access to shares of SEC-qualified investments in rental homes and vacation rentals, curated and vetted for their appreciation and income potential.
Backed by world-class investors like Jeff Bezos, Arrived makes it easy to fit these properties into your investment portfolio regardless of your income level.
Their flexible investment amounts and simplified process allows accredited and non-accredited investors to take advantage of this inflation-hedging asset class without any extra work on your part.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.