is a college education worth it?

Question

twin boys (both 18 years old) inherit $100,000 each from a deceased uncle. the first twin uses the money to pay for a college degree and soon lands a job paying $70,000/yr the other twin just gets a job paying $20,000 per year. but invests the $100.000 at 10% annually in the stock market. For argument's sake let's assume both brothers spend every cent they earn for the rest of their lives (they both "keep up with the Jone's" and live paycheck to paycheck and do no other investing).In his lifetime which brother has earned more money by the time they are 65 years old (again for the sake of argument assume neither brother ever gets a raise or just take the salaries as being averages) ? and how much?
u can calculate interest at
http://www.moneychimp.com/calculator/compound_interest_calculator.htm
(note: i do have a college degree myself, but I'm just wondering if it was worth it)

please folks , lay off the 'your a better person if u have a college degree' bullshit I'm looking for a mathematical answer here in terms of money earned over a lifetime.

Answer 1

This is a loaded question.

Obviously anybody who has a $100K head start for 4 years is going to do well. By the time the non-degreed twin is 36, his interest (over $50K by this stage) and salary is greater than 70K a year.

BUT, how many people have a University education, and stay stuck in the same job their entire lives - not many, after all, some of them will be promoted to the next step up to make room for the new graduate (and each person moves a step up because somebody has retired)?

The real question is who has the better life?

YOu say that both brothers spend every cent they earn.............well, if I have 50K more to spend then somebody else.....I probably have a bigger house (after all, the mortgage is spent money) and the value of such a house needs to be taken into account, I probably have seen more of the world.

Also, you can look at any online dating site, the more money you make, the more money your wife probably makes (do a search of some dating sites, and filter by females annual income, the more money a woman makes, the more ehe expects her partner to make)..........So, the $70K a year twin's partner makes more than the $20K a year twin's wife.

Also, the intangibles associated with the process of getting the degree itself (for most people anyway) is far more valuable than money.

For the record, $100,000 invested for 47 years at a 10% annual rate of return is $8, 819,748.53 + 47 yrs at $20K is a total of $9,759,748.53

The degreed twin makes $70K for 43 years or $3,010,000...............or almost $7MM less

Answer 2

Was my college education worth the cost? Absolutely, yes. My brother, who didn't go to college, only makes about $35k per year. I make SIGNIFICANTLY more than that. Orders of magnitude more than that; and I would not have been eligible for the job I hold without both a bachelors and a masters degree. You've made an assumption in your argument that doesn't hold. You've assumed that it's all about the money. Keep in mind that for many people, it's not about the money. It's about the choice of field they've made, and in what profession they'll be happy and successful. Yes, a plumber earns more than a social worker. But if your dream or desire is to be a social worker, that's not about the money - and you need the degree. Now, is a uni degree the right thing for everyone? Absolutely not. IMO, if you're driven, you'll be successful with or without that degree, and there are great careers out there, specifically in the trades, that don't require a degree. But if you want to be a psychologist rather than a plumber, you need the degree. BTW, I am also a member of Mensa. Being a member of Mensa doesn't give you street cred. It's not something that helps an argument like yours. In fact, bringing it up the way that you did is really kind offputting, as you may have noticed from some of the responses.

Answer 3

If a person wants to live a life filled w/material things, then a college education can buy those things. As for investing in the stock market--that's a BIG risk, especially after 9/11!! I guess if a young person was willing to discipline themselves enough to complete a degree program, it could be very advantageous. A person w/a college degree earns more (statistically) than those w/only a high school diploma or G.E.D. How many ppl have rich uncles???

Answer 4

It may be apparent that going to college's primary goal is to get a job that would pay more or whatever. However, from a society's view, certain roles need to be fulfilled; if everyone were to get $20,000 job but the job is same for everyone, then society would fall apart.

From an individual perspective, you could say that they earn the same amount in their lifetime. But I feel that if the only thing you get out of college is your skills for your job, then you may have missed other important parts to your education. i do not know if you went to a liberal college or not but core classes aren't just classes you take to get them out of your way. You can take what you learn from them and apply them to your life. With a college education, you are actually learning how to do things that many people can't do and the knowledge you hold is a kind of power. As an extreme example, take the atomic bomb. The scientists are really good at what they do and there are very few who can think like they can. But if they were to consider the consequences of their discovery, maybe history would have gone another way.

Bottom line, I think college education is worth every penny. From the financial perspective, maybe it is the same but outside of finance, it makes a lot of difference.

Answer 5

Your comparison is not apple-to-apples because the college guy gets to spend 3.5 times as much every year as his brother. To make it apples-to-apples you need to assume they each live on $20,000 and the college guy invests his $50,000 every year. Also you need to assume the college guy waits 4 years to begin earning his income.

I set up an Excel worksheet to compare the two guys' investments. The guy who skipped college has over 8.8 million at age 65 but the college guy has over 32.6 million.

A more realistic comparison would be that while one brother is going to college the other is driving a big 4-wheel-drive pickup, watching his big-screen TV, and spending lots of money on his girlfriend, on booze, on entertainment. By the time the college kid has been working 4 or 5 years the other brother has burned through the 100 grand and has nothing left to show for it and of course his girlfriend has left him but he's now paying child support to her so he'll pretty much never have a dollar to his name. Meanwhile his college-educated brother is building a new house in the suburbs, has a wife and two kids and a bright future. The brother who chose to blow his inheritance then describes his brother as "lucky".

Answer 6

I do not use calculator to answer your question. They both will be fine if they know how to handle properly. Let say twin boy1 with 70k/year is A, the second twin boy is B.

If the A boy do not save after college, living or spending all of his money, he is doomed.

Other case, If the B boy is untouch his money and save it as retirement money
so at the age of 18, he got 100k
By THE RULE of 72, 10% annually return, it takes closed to 7.2 years is his money double

Hypothetical situation.
when the B boy at age 25-26, his investment should be at 200k
when the B boy at age 32-33, his investment should be at 400k
when the B boy at age 39-40, his investment should be at 800k
when the B boy at age 46-47, his investment should be at 1.6 millions USD
when the B boy at the age 53-54, his investment should be at 3.2 millions USD
when the B boy at the age 60-61,his investment should be at 6.4 Millions USD

At that time, He can live off his interested for the rest of his life without running out of money
With 6.4 millions at 5% interest, that about 320k/year for the rest of his life.
Did my answer satisfy your question?

Answer 7

dude, do your own math homework.
Oh, and that whole college makes you a better person and you'll make so much more money crap.
REALLY REALLY REALLY depends on what you study people. There are alot of fools out there getting useless degrees so that they can go and make minimum wage after graduation. Have fun paying off the 20,000 dollar college loan on eight bucks an hour. Don't get a degree just to have one unless you got a buttload of money laying around.

Answer 8

In your hypothetical question, it may work out to be that the boy who didn't go to college ended up better off financially, but that is not usually the case. Even if you don't make more money with your college education, you are better off because of several other factors that you have yet to foresee. 1) You've proven that you have the ability to set goals and see it through to the end. 2) You've learned time management skills and organizational skills that your uneducated friends won't have 3) You have a well-rounded view of liberal arts due to the variety of classes you were required to take. 4) You will be able to get a teaching credential in no time. 5) You have a feeling of self worth, accomplishment and pride that your uneducated friends covet.

Answer 9

I did not go to college, I am in the top 5% income level in the USA. I went to work right after high school. I started my business three years ago and now have people who went to college work for me. I realized that I was lazy and not smart enough to go to college. Society makes young people think that if they don't go to college then they are losers and will never make any money. It is sad that high school teachers push kids to go into debt, they drop out or go get a job and pay back loans for twenty years for a job they could of had if they didn't go to school. I am 30 years old and think unless you go for a skill you can not get through real world learning it is a waste of money. Just my opinion.

Answer 10

The one that does not go to school has his invested money turn into $8,819,748.53. That plus 47 years at $20,000 equals $9,759,748.53.

The one that does go to school has $3,290,000 after 47 years of work.

However, the one that went to school is far smarter, and if it weren't for your assumptions of spending all their money, would likely be able to invest more of his paycheck.

Also, whats to prevent the first one from spending some of his interest earned? I'd much rather live on $70,000/year than $20,000/year.