Warren Buffett was once asked if college in America is still worth it. Here’s his unexpected response — plus a few ways you can make investing in your kid’s education a little easier

Chris MacDonald
Warren Buffett was once asked if college in America is still worth it. Here’s his unexpected response — plus a few ways you can make investing in your kid’s education a little easier
Warren Buffett was once asked if college in America is still worth it. Here’s his unexpected response — plus a few ways you can make investing in your kid’s education a little easier

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The question of whether a college education makes sense in this day and age isn’t an easy one to answer. Indeed, when investing giants like Warren Buffet have difficulty answering the question of whether a university degree will pay off over time, you know the average person may have even more trouble trying to answer the question.

Measuring the return on investment (ROI) of any big transaction is what most long-term investors try to do. In the case of higher education — where costs seem to continue to rise on an annual basis, and the benefits of said education are less easy to quantify — the decision can be daunting.

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In a 2020 interview with Yahoo Finance, Buffett pondered whether the four years he spent in higher education ultimately had the return on investment he was hoping for. After all, he noted most of his learning came from reading, and that reading typically took place outside the classroom.

Let’s dive into what to make of this conundrum, and what millions of Americans may want to consider before they, or their children, make the decision to attend college or not.

Personal balance sheets matter

Thinking about your household as a company with a balance sheet is an excellent way many experts suggest framing big life decisions. Whether it’s the Brookings Institute or many financial planners, assessing how your assets (like houses, cars, and other tools for life) correspond with associated liabilities (insurance, taxes, operating expenses) is something to think about.

Higher education is a big up-front investment in an individual’s personal balance sheet, and comes with a very large price tag. The question, then, is whether the tens (or hundreds) of thousands of dollars one spends on a degree, or two, or three, makes sense in this day and age.

If you’re a parent looking to invest in your kid’s university education or a student looking to get a better handle on your school debt, College Avenue is here to help.

College Avenue is a financial services company specializing in private student loans and student loan refinancing. You can get flexible and customized loan solutions to help you finance higher education with ease and efficiency, with no hidden fees and competitive interest rates.

To find out more about their flexible loan options, simply complete their quick online application (it only takes a few minutes!) and be sure to take advantage of their tools and resources to help both parents and borrowers like you understand and manage student loans.

As Buffett says in his interview, whether you opt for university or technical training really depends on the individual, and the school one chooses to attend. And, he noted, “there’s a lot you can learn in those four years.” That’s the whole point, after all.

Read more: Car insurance rates have spiked in the US to a stunning $2,150/year — but you can be smarter than that. Here's how you can save yourself as much as $820 annually in minutes (it's 100% free)

Start saving now

For those who want to invest in their kids’ education and future, saving money is crucial to avoid the crippling debt that student loans can create.

Whether you’re trying to save for your kid’s education or you’re trying to build up your own college fund, starting early can provide the best benefits over the long-term, thanks to compound interest. There are many ways to put some hard-earned capital away for education expenses that are worth considering. For those looking to go with the more conventional savings route, certificates of deposit (CDs) are a viable option.

If you wondering where to start looking for one, CD Valet is a platform that provides a range of options for investors looking to access CDs with the most competitive rates. CD Valet also provides information on each certificate of deposit to help investors make the most informed decisions possible.

A downside of a CD is that if you withdraw any of the funds before the end of its set term, you’ll face a penalty fee.

If you want a more accessible way to save, Wealthfront’s cash account offers a way to grow your savings at a faster rate than many other similar accounts.

Wealthfront offers 5% APY, and fast transfers (without fees) to Wealthfront investing accounts as well as external accounts. This allows you to grow your savings for that college tuition faster than if you just leave your money in a checking account. Unlike a CD, there’s no term requirement so you can access those funds when you need them.

Invest with your goals in mind

Managing your major investments in both career progression (and financial assets) is certainly an important piece of the puzzle.

While the average college graduate earns roughly 86% more over their lifetime compared to their peers who stopped at graduating high school, they are also much less likely to be unemployed, according to a recent study from the Foundation for Research on Equal Opportunity. Their research also shows that nearly half of all master’s degrees have a negative ROI.

Thus, while Warren Buffett did get his master’s degree (and it certainly looks like this decision paid off for him, the math is clearly different these days.

Instead of pursuing a six-figure degree, many who may choose to apprentice for a trade out of high school and start making $80,000 per year within six months may be better suited over the long-term, and may be much more easily able to save up for a down payment on a house, for example, and start investing.

The hope for college graduates is that the relatively higher salary one might earn over their lifetime will more than make up the difference, and they may end up in a better position over the long-term.

In either case, diversifying one’s personal balance sheet and investing in assets that can grow over time is important for every investor, at every stage of life. In order for investors to have a shot at making it into the top 10% of society (which owns around 93% of all equities according to recent estimates), investing in the stock market has proven to be an excellent tool to move up the economic ladder.

One company that’s worth considering in this regard if you’re an active trader is tastytrade. tastytrade’s platform allows investors to place trades (either short-term or long-term), with tools like curve analysis and order chains to facilitate risk management in your portfolio. With these beneficial learning tools, you can build a strong knowledge of trading. A competitive margin base rate of 10% means tastytrade aims to lower costs for margin trading for active investors.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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