Go to College or Invest?

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by Ryan

What if you didn’t go to college, but instead invested in your retirement with your would be college funds? How would your financial picture look, and would you be better off financially in the long run?

How much does college cost?

It really depends what part of the country you’re in, but estimates for public range from $7,000-$9,000 a year, while private runs $25,000 and up. Of course, this is simply tuition, and doesn’t include meal plans, room and board, and other expenses. For a student going to a public school and getting out in four years they’ll have a $36,000 pill to swallow if they haven’t accumulated credit card debt and haven’t worked a job during school.

Needless to say, college is expensive.

What would compound interest do to that amount?

Let’s pretend for a moment that instead of going to college the would be student saves the same amount as what the college tuition would’ve been ($9,000) for four years. That means by the time they’re 22 they have $36,000 saved. If they then invest this amount and don’t touch it until they retire and achieve a market average of approximately 8% they’d achieve a nest egg of over $1.9 million. They also wouldn’t have any debt so they’d just have to pay for their basic living expenses.

Retirement Graph

Of course the interest rate is something that could be greatly argued, but this is simply a scenario to show you that investing young could set up the student better than going to college. I realize this is highly debatable, but that’s the point.

What would you do instead?

Of course you don’t need a college degree to be successful. You can have a high paying job without a college degree. A college degree is a piece of paper that gives you acceptance by an employer who thinks it’s necessary. However, if you’re ambitious you could work as a freelancer and create your own resume through experience and your portfolio. You could also start your own business and not focus on what a potential employer thinks about your credentials.

To some getting a college degree has become the twenty first century version of getting a high school diploma, if you want a basic job, you’re going to have to get it. However, that’s if you want a basic job.

If you’ve got a degree in philosophy, art, or other liberal arts topics that don’t have much real world application you’re probably not going to earn all that much more than if you just took a job at starbucks out of high school anyways.

There are plenty of jobs out there that simply require an associates or technical degree that pay a lot more because they’re specific and relate to an actual job. Learning about liberal arts may benefit you as a person, but it’s not going to necessarily make you a better accountant, draftsman, or air traffic controller.

I realize college isn’t a purely financial decision, there are other benefits, but for most people who simply go to college to “make more money” I invite you to consider the alternatives including investing young, learning a trade, and avoiding unnecessary debt.

Do you know of anyone who decided to invest long term rather than go to college?

Do you think a four year degree is still worth it when compared to investing and/or getting a technical degree?

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{ 8 comments… read them below or add one }

Jane Sanders January 12, 2011 at 8:44 pm

This is a really interesting analysis, Ryan. I think for self starter types who wouldn’t want a typical job anyways, skipping college is a no brainer. Of course, most of these people don’t realize what they want until they’ve been working a few years. Another point is that skipping college will typically exclude you from most super high paying jobs. Banker, attorney, doctor, executive, and the like all usually require a college degree.

There is really no simple answer but I think your post makes an important point that going to college should not be something everybody does without thinking about the costs and benefits.
Jane Sanders´s last blog post ..Straight from the Horse’s Mouth- Fair- Isaac CEO on Credit Scores

lovely leverage January 12, 2011 at 9:50 pm

If I could do it all over again. I’d invest instead of going to school. The 4 years I spent in college, 1/2 of it was a waste. I studied business and concentrated in Finance. However, the institution did not teach me any personal finance but all corporate stuff. I think school just want to keep the general public uninformed, and want us to work for corporations.

Bradley Gauthier January 13, 2011 at 3:09 pm

Even though I’ve graduated a few years ago, I still go back and forth on this. Was it a waste or not? And most of the time I feel it wasn’t worth it (especially when Sallie Mae comes calling). I had a successful business that I dropped when entering college, was playing around with the stock market for years and would have easily made a living having not gone. However, college isn’t all just about college. The classes teach some valuable stuff. But the real learning is the investment in yourself. As cheesy as that sounds, it’s true. The continual experiences college students receive are life altering.

So ultimately, I’d have to say I’m glad I went to college.
Bradley Gauthier´s last blog post ..Who’s Behind the Brand 15 Examples of Companies Rocking Social Media

Get Happy Life January 14, 2011 at 10:27 am

I think that going to college opens far more opportunities in life and from that point of view it is better to go to college rather to invest.
Get Happy Life´s last blog post ..How Honest Should You Be With Your Friends

Jennifer Barry January 16, 2011 at 3:28 pm

Hi Ryan, I think this is a complicated question. If you have a solid plan for a high paying job like being a doctor, then college makes sense. Whatever you pay in tuition will be paid off pretty quickly after graduation.

If you don’t have a good plan – and most students don’t – I doubt it’s worth it. I am still paying off my Master’s I received in 1996, and I would not do that again. The unemployment rate for young people is extremely high right now, and college grads are fighting over barista jobs. I think you are better off investing in skills that have a quick payoff such as hair styling, or other efforts to work for yourself.

If you mean investing in the US stock market, I think that’s a losing proposition for most people, and certainly not a guaranteed 8% yield.
Jennifer Barry´s last blog post ..Housing- To Buy Or Not To Buy

Financial Samurai January 16, 2011 at 11:41 pm

That is pretty shocking what will happen if you invested it and got the 8% annual return! One should do both!
Financial Samurai´s last blog post ..Hire A Personal Trainer Or Get Buff On Your Own

Charles February 24, 2011 at 12:17 pm

WOW, what a potentially controversial discussion. It’s like the classic Rent vs Own debate. Unfortunately society has brainwash us to say “Own” and say “College” when in reality, it should be up to the individual to weigh their choices which you elegantly laid out.
Charles´s last blog post ..Money Management Lessons for Recent College Graduates

One Investment December 21, 2011 at 5:51 pm

I too think this is a question one could argue about forever. There are a lot of positive and negative points of going to college. For I think going to college is also about learning more and improve yourself in social life, find new friends for life, maybe even your wife/husband. And so I agree with Bradley Gauthier, when he says that college isn’t just about learning “study-stuff”. There are so many things to consider. But still, if you manage to save some money after graduating, you could still invest it. So there is the question all over again… So Thanks for this great post!

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