This is part 1 of 2 of what I think is a gravely misinformed idea most parents have about investing in their children’s future. Part 2 can be read here.
There are several things parents need to be aware of when thinking along the lines of ‘investing in education’. ‘SAVING’ money in some kind of fund is not a form of investment, it is a form of saving, and when today’s socialnomics rules have changed, savers are losers.
An investment in something means that the amount we will reap will be many times the principle amount we invested. For instance, if we spend an average of $300 a month on books, uniform, transportation, school fees, tuition fees, school activities, etc over the course of 11 years, that would total (give and take) $50,000 once you factor in inflation and a devaluation of currency….… It’s going to take more and more money to equal the value of something, so it’s not necessarily true that the prices of things are going up except that it now requires more and more devalued currency to purchase items that provide the same value. So, remember, you have to factor that in too when you’re ‘investing’ in your children. I know the actual amount for most people goes higher than $300 a month. We haven’t yet calculated the real costs of lost opportunities into it.
Once you add tertiary education in – well, we know the Math. Assuming a school dropout eventually earns $5,000 nett a month as a, say, foreman or entrepreneur or some other form of skilled craftsman, how much more would a ‘schooled’ child need to make in order to say an investment paid off at X% after all factors considered, etc.? Many people take for granted that a university undergrad, grad or post-grad is a form of INVESTMENT into the future. That is only true if the institutions are adding a chain of value to the ‘commodity’ i.e. the child’s innate nature/abilities. How many of us can say that school helped us identify our innate gifts and nurture them to fruition?
My own schooling experience taught me that my “writing should not exceed 350 words and arguments must be more down to earth”. My sense of justice and my ability to illuminate what others are feeling and express them in words got me labelled, “If you think you’re so smart and want to change school, then go be a teacher or politician”. My schooling experience invalidated my observations and intuitions into what I sensed was a dumbing-down curriculum. But as we know by now, it’s absolutely untrue that teachers, as “civilized” servants can create any real change in the bureaucratic setup of school, what more the policy-making educrats.
Undergraduate studies, while an opportunity for social freedom and growth for man is just a protracted process of schooling, not an addition to an investment. What most people undergo when they get to college is to struggle through undergrad, scraping through grad and tightening their belts to do a postgrad. Then one of two things happens : The undergrad or postgrad drops out of school – therefore, defaulting on the previous 11 years’ worth of investment which staked everything on a future whereby the ROI would beat what the average non-schooled person is making.
The widening divide between the business world and schooling created a reality today’s graduates are ill-prepared for : to find that the market doesn’t REWARD mere time spent in an academic setting. It hardly matters to universities and colleges if students drop out – until the dropout rate is too high that it affects the university’s ability to pull in more paid students. So what are parents REALLY investing in since both schooling and tertiary education is NOT accountable for producing the ROI parents are investing in? Would any investor pump 11-15 years of money into a company that has a track-record of not being accountable for employability and a certain % of return that would make it worth it? Would you keep money in, say…a fixed deposit if inflation is going to rise faster, or the rate at which your currency is being devalued is faster than the interest you could accumulate? The $50,000 you put in 10 years ago will no longer buy the same things.
To be RICH and to have a RETURN is to have double digit returns. We’d like to believe that what was true 50 years ago will continue to be true 50 years from NOW. We’d like to believe that we live in a “stable” and “constant world”. It doesn’t even matter that tectonic plates tell us otherwise, we are beyond the elements of Earth. We’d like to believe that in general, people who are more educated earn more money. But they only earn more money not as a result of the education, but as a result of the market still being willing to bear the cost to juice them for their abilities. But markets change.
I don’t have a to be an investor to tell you that MARKETS CHANGE and if you cannot detect the currents you’d most likely drown. When people frame their future based on their past, in this case, assuming that the more time and money one ‘invests’ in their child’s education, the same thing that held 50 years ago (in the 50s) will hold true for the next 50 years (80s to 2030s). Now, ask an investor who does the same thing : Can we make money from shares BASED on their performance in the past or do we make money based on our knowledge of the current, undergoing, fundamentals of a company?
But most people do that, with investing in shares and investing in education. The first people that got in bought low and will make money regardless of when they sell because they were in the know about the developments and undergoings of the fundamentals of the company/market. So other people tail that and buy higher…and some are lucky enough to STILL sell even higher. While previously, investors were buying based on REAL KNOWLEDGE of fundamental market behaviour, now, speculators are buying whatever that the price is going UP UP UP and GAMBLING to be able to SELL HIGHER and get out rich!
If you know what happens in the stock market when stock prices go up because of increased demand rather than strong fundamentals, you will realize that is exactly what will happen to your investments in ‘education’. People today are investing in ‘tuition’ and ‘workbooks’ and doing well in school which is so 60s! Their reason is because ‘they didn’t get to buy in back then.’
Even during the time I was in school, the market no longer rewarded academic prowess. It was beginning to reward emotional and social intelligence, being able to think out of the box, being able to use technology and being able to be a self-directed learner. The bubble was due to burst two decades ago but new wealth has been sustaining the inflated perceptions. We know what happens when a really big bubble bursts. I profess that I know absolutely nothing about finance, economics nor investment so you don’t have to take anything you read here seriously. I just knew enough of what I know to get out of advertising when I saw the end of the road for mass media (in 1995) just like I knew enough not to try and be a “good student” to earn brownie points playing by the rules of a dumbed down learning experience.
I’m wrong with a lot of things but I’m generally right about sensing “shifts”. It’s extremely difficult sometimes in my capacity as a teacher and a parent to talk about things which cannot be ‘touched’, ‘seen’ and ‘proven’. But I do know that the more invisible something is, the more powerful its force tends to be. I’d like parents to listen and invest in the strength of the fundamentals of the next big market. I’m already investing in that. If you don’t know what those fundamentals are, then it’s time to worry. If your money’s already in and you cannot time the market except gamble on it, ….well, I’m just saying. Don’t listen to me.
[Read Part 2 of Investing In Our Children’s Education here.]