Education StorySubmitted by Karstens Investments on May 3rd, 2016
By Michael D. Karstens, CFP®, AIFA®
I remember a Berkshire Hathaway meeting some time ago in which Warren Buffett had mentioned a speech to some young students in which he hypothetically offered to buy them a new car. He offered them the opportunity to buy whatever they wanted – Ferrari, Lamborghini, Rolls Royce, etc. But he added a caveat, that whatever car he purchased would have to be the only car they ever purchased during their entire lifetime. He then asked the students how they would treat that car if they accepted the offer. He theorized that they would likely take amazing care of it. They would change the oil on a regular basis, if there was a dent or rust spot they would immediately fix it. They obviously would drive very carefully to avoid accidents and just basically pamper their car. He concluded his speech by saying this is basically the deal we have been given with our bodies and our health. Since we only get one body, we should take great care of how we treat it, what we put into it and how we take care of it. After all, we only get one. For some reason, I thought of this story as I came across charts A and B. Buffett has often been asked what is the best single investment a person could make and he often has said an investment in yourself. Over the years I have been very pleased to see how many of our clients have taken these words to heart for not only themselves but also for their children and grandchildren. Everyone knows how expensive the cost of a college education has become, but these two charts illustrate how good of an investment it often is.
Today, a four-year college degree is more valuable than it ever has been. In 2013, the pay gap between holders of college degrees and everyone else reached a record high. Workers with four-year degrees made 98 percent more an hour on average than people without a degree, up from 89 percent in 2008, and significantly higher than the 64 percent mark seen in the early 1980s. The annual pay gap of a college degree is significant but the difference in career earnings makes a college degree an amazing investment. As you see in Chart B, the unemployment rate is also much lower for graduates than non-graduates.
As Buffett says, “an investment in yourself, both your mind and your body, is one of the best investments you can make.” •