On an individual level, sometimes a trade school makes more sense for your or your children’s financial future.
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Although my parents never had the opportunity to go to college, they were very successful.
Their success gave me the opportunity to pursue higher education, but ironically, I doubt I will ever be as successful as they were.
My mother is one of the founders of the Wealth Enhancement Group, which I would refer to as “my inspiration for being in the financial services industry.”
As for my father, he wrote computer programs that sorted the data and turned it into a direct mail marketing business.
But what I think makes them so special is that, on top of all that, they also did real estate development. My dad got his general contractor’s license so he could oversee the projects. They then went on to design their own houses. They were never afraid of losing everything because they never had everything.
I doubt I’m not the only one who feels this way about higher education. As a financial advisor, I see this narrative play out every day in my office with clients.
How did we get here?
Many people still believe that attending a four-year college is the only way to achieve financial stability and success, but that is not always the case.
Over the past few decades, the middle class has expanded, along with the desire for white-collar jobs. College therefore became the default path, contributing to the cost of higher education rising 169% from 1980 to 2020, according to a Georgetown study.
The pool of candidates with a college degree has become so saturated that it allows employers to keep starting salaries low. To make matters worse, approximately 34% of college graduates are underemployed.
The return on investment of a college education has been in steady decline for some time. And this gap between cost and profitability has become so wide that it has recently required government intervention.
And while President Joe Biden’s student debt forgiveness plan has certainly provided relief for many Americans, it’s only a Band-Aid on a big laceration.
As tuition continues to rise and wages don’t seem to keep up, many Americans have to ask the question, “Is college worth it?”
Weigh all your options
As a parent, I know that we are often so afraid of our children missing out on opportunities that we sometimes steer them away from paths that deserve a longer look. As an adviser, I fear that we have normalized advice to take on mountains of debt without even considering alternatives.
And with the way things are going, the value of a college education, both in perception and reality, will be dramatically different 10 or 20 years from now, when students (and their parents, many of whom are worried about how to save for college) have to make a decision about what to do after high school.
Consider all options. Hand in hand with the premium offered on college education, there is a terrible stigma attached to trade schools and blue-collar jobs. But the pandemic showed us that we need these jobs to function as a society. And on an individual level, sometimes a trade school makes more sense for your (or your children’s) financial future.
For others, direct entry into the workforce makes more sense.
We continue to see more employment in construction, healthcare, IT and technology. In these sectors, there are many opportunities outside of traditional schooling. Coding bootcamps, growing opportunities for entrepreneurship, and the gig economy have transformed the way we should think about the future. It’s a future that doesn’t necessarily go through a four-year college.
Be prepared no matter what
What are the implications for financial planning?
Emotionally and psychologically, reevaluating your college plans can help you realign your current priorities.
Maybe you’re sacrificing an emergency fund or saving for retirement because of the pressure of rising tuition. For you, knowing that there are good, and for many people, better options outside of college can help you feel comfortable putting your money where it should go.
And 529 college savings plans, the most popular vehicle for college savings, are much more flexible than you might imagine. Assets in a 529 plan can be used in two-year associate degree programs, trade schools, and professional schools.
The most common fear that keeps people from starting a 529 early is the possibility of paying a 10% penalty and income taxes if the child doesn’t use the funds for qualified education expenses, but don’t let let the fear of punishment prevent you. good planning These penalties are offset by deferred tax gains and recapture of state income tax deductions.
I mean investing in people, not blindly investing in a path that everyone says is the only path to success. There are many doors to a financially stable and prosperous life. I hope you will take the time to consider them all.
— Nicole Webb, Senior Vice President/Financial Advisor, Wealth Enhancement Group