Using The Rule of 72
to explore the ROI of a college degree
ESSAY CURE’s Christine Gacharná sits down with Todd O. Pettibon, Vice President of Business Strategy & Portfolio Manager at Toth Financial, to discuss the Return on Investment (ROI) of a college degree that students should consider.
Key Takeaways:
The average cost of an in-state, undergraduate degree can be anywhere from $80k-$100k for tuition, room and board. This is a huge investment.
Graduating from college leads to higher lifetime earnings on average, but only if the student actually graduates. Many students take on student loan debt but then don't finish the degree, which means they don’t walk away with the tool to help increase earning potential.
Students should consider alternatives like community college for the first 2 years to reduce costs.
The earlier students start saving and investing, the more their money can grow and begin to work for them through compound interest.
Remember: it's not how much money a working professional earns, but how much that same person saves that leads to building financial independence. It’s important for students and professionals to live within their means.
Alternatives to Reduce College Costs:
Completing the first 2 years at community college.
Working for a year between school years can help avoid debt.
Getting the best value for your degree matters — while an expensive degree may provide a valuable network, it may not necessarily lead to higher earnings.
Investing Early for Retirement:
The Rule of 72: Take the number 72 and divide it by the Average Annual Rate of Return, and that will tell you how long it will take for a portfolio to double.
Investing the $80,000 (cost of college) at age 20 could turn into $344,000 by age 40 with an average 10 percent return — and this is without putting any more money in! Most investors will save 10-15 percent of each paycheck, so the final number at age 40 could be significantly larger.
Start saving and investing as early as possible — time is a person’s biggest asset when young. The earlier a person starts saving and investing, the more that person’s money can grow through compound interest.
https://thecollegeinvestor.com/7868/college-worth-investment/
https://educationdata.org/average-cost-of-college