Education the Creator, Education the Destroyer
Kevin surprised me. I knew that he didn’t have much money because he was putting himself through his second Bachelor’s degree. So I guessed that his financial story would be about how it sucks to be poor while your friends make big money. Instead, I found a story about a passionate individual who was willing to take steps that very few others in their lost 20s would likely take.
Kevin grew up in one of the wealthiest small towns in America, right outside the Silicon Valley. “My parents were my biggest influence [regarding money]. They talked with me about it, set up an education account for me when I was young, and they put $100 in it for every $100 I put in it.” He worked scooping ice cream all through high school, and was extremely frugal, putting away almost everything for college (which his parents dutifully doubled). He learned early on how to make a good return on his money, and today he still holds some stocks, even while paying for school.
Kevin joined the Peace Corps after graduating from college. In addition to learning about sustainable living and renewable energy, he saw poverty — real poverty. Upon returning to the US, he realized that he didn’t want any of the jobs that his undergraduate degree could offer him. He wanted to be able to work for causes that really mattered.
He spent some time in Los Angeles selling restaurant supplies. “I chose electrical engineering after coming back [from the Peace Corps], selling restaurant supplies in Los Angeles, and living in a garage with my cat.” He was making money — but he didn’t like his job and the city was expensive. So he went back to school to study electrical engineering because of his interest in renewable energy and sustainability.
“Getting a second Bachelor’s degree is unusual,” admits Kevin. While graduate programs offer scholarships and teaching stipends, there are no such financial perks for a second undergraduate degree. He works at a travel store to finance his second swing at education.
For many young adults who haven’t discovered a career, continuing their education can seem like a good default option. For Kevin, however, it’s an expensive decision that costs money now and delays future earnings. He graduated from his first degree debt-free, but it doesn’t look like he’ll be so lucky this time around.
How do we help people like Kevin make better educational choices the first time? The cost of college tuition and the amount of student debt is rising faster than ever, and the financial consequences can impact graduates throughout their lives.
There are no easy answers to these questions, although potential solutions from debt forgiveness to free college have been making the political rounds lately. Personally, I think it comes down to financial education. One of Monte Largo’s core principles is that Independence is Built on Education, but I think we need to clarify what that means.
When young adults understand basic financial principles like cost-benefit analysis and return on investment, they are empowered to make better decisions about higher education. If high school students and their parents had the financial education to choose schools and degree programs with a higher return on investment, productive schools would benefit, while unproductive schools(read: private and for-profit schools with poor job placement statistics) would justifiably fail. This would ensure that every student was a good fit for the degree they chose.
For high school students who haven’t found a passion by graduation (read: all high schoolers), community college is an excellent (and frugal) way to study a well-rounded curriculum while delaying the important decision of choosing a major. Other students may choose to serve in the military to gain job experience and generous financial aid packages, while others, like Kevin, could join service organizations and volunteer. Free and low-cost online learning from traditional universities and innovative private organizations is yet another way for students to get a taste of a wide variety of subjects before specializing.
Most importantly, education in personal finance is critical to reforming higher education. Prospective students must be able to articulate the goal of their studies, understand the financial consequences of their choices, and do the math to make an informed decision.
We know this works because the most affluent communities in our country already do it. The wealthy send their kids to high schools with classes that are representative of the job market (like robotics or accounting). The wealthy and intelligent focus on Pre-K education. The wealthy, intelligent, and frugal do all those things and encourage their children attend community college or consider alternatives to minimize their university expenses and maximize the rewards.
I have no doubt that Kevin has a bright future in whatever field he chooses. He’s smart and driven. But I’m betting he, his parents, and the economy, would have been better off, had he made the right decision the first time around.
Nathan is the Chief Financial Advisor at Monte Largo Financial
*Kevin’s name has been omitted for privacy