Posts Tagged ‘Education’
20-Something? Know or related to one? This short article should be required reading for those in college or recently graduated.
Only 58% of students from four-year institutions say they feel prepared to manage their money. Three out of five don’t use budgets. 17% say they don’t even manage their money; their parents do it for them. 16% say they lived paycheck to paycheck, and yet only three-quarters stop spending when their bank account balances were low.
I keep saying that the sexy job in the next 10 years will be statisticians. And I’m not kidding.
Hal Varian, chief economist at Google, in an article at the site Quartz that questions whether “statistical literacy” needs to be added to the increasing attention paid to mathematical competence in basic education.
Nearly 45% of 25-year-olds have outstanding student loans with an average balance of more than $20,000. Worse yet, more than one-half of recent college graduates are unemployed, or under-employed working for substandard pay at jobs that do not require a degree. One in five has moved back in with their parents, and more than half receive financial support from them. These alarming data points are from the recent NY Times article The Boomerang Kids Won’t Leave.
How much of this is simply the prolonged fall-out of the Great Recession and how much is structural change is unknown. But the Times article, and many others, suggest that the increasingly high costs of a college education may require a rethink of the automatic decision to attend university at any cost. Where college once was the best, and affordable, guarantee of a well-paid career, today it is increasingly just a very expensive admission cost with an increasingly uncertain payoff.
The Washington Post cites a U. of Miami study showing the relationship between HS GPA and annual adult earnings. Each added point of GPA by itself translates into a 12-14% greater annual salary, regardless of higher education. Of course, a higher GPA also means a far greater likelihood of graduating college with even further earnings potential. (Lastly, the large disparity in this study between men and women’s earnings is unmistakeable)
Older adults who underwent a brief course of brain exercises saw improvements in reasoning skills and processing speed that could be detected as long as 10 years after the course ended, according to results from the largest study ever on cognitive training.
This is from an NBC News report discussing recent research in the field of “brain training.” These mental workout programs are demonstrating positive results in slowing or arresting the trajectory of cognitive function decline in aging adults.
I first became acquainted with this concept after a broadcast series on the topic on our local PBS affiliate. In addition to crossword puzzles, I added Lumosity to my own personal regimen two years ago. (Caveat: I have not seen any studies that compare the results of a consumer brain-training program like Lumosity with the results obtained by the more rigorous methodologies discussed in the research.)
According to the recent PISA study of educational accomplishment, 10th grade students in China are 2 1/2 years ahead of their American counterparts. Two and a half years, for chrissakes! This and other shortcomings of our K-12 system are explored on Fareed Zakaria’s GPS segment entitled “An absolute wake-up call for America.”
Fareed’s panel included the Superintendent of the NY City schools system, the founder of Teach for America, and Sal Khan of the Khan Academy. A few of the major differences they noted between school systems that are at the top of the list (Germany and Finland along with China) and ours. The top-performers:
- Place high societal respect and provide competitive compensation for the teaching profession
- Furnish ample resources for teacher training
- Are open to adopting the best practices from other countries
- Foster active parental involvement
- Have no school-based sports programming, spending the time instead on academics.
These “best practices” would be great enhancements to the US system, difficult but not impossible to achieve over a generation (though the elimination of school sports would most likely be dead on arrival as a suggestion).
But to me the most telling and readily actionable difference the panel discussed was that students in China attend school an average 50 days a year longer than their American counterparts. Over ten years, that is 500 days, or curiously enough about 2 1/2 years. Our kids just don’t spend enough time in class and a simple fix thus might be to start gradually extending the K-12 school year.
We continue to work off an educational calendar based on the needs of our agricultural economy during the 19th century. Overhaul is way past overdue and our failure to invest in and to modernize K-12 educational delivery to meet the needs of the 21st century is jeopardizing our children’s economic futures.
Q: Other than 529 accounts, are there any other investment vehicles I should be considering to help take care of my children in the future?
Assuming you are on track with your own retirement funding needs, then a 529 plan, Coverdell education Savings account, or even a Roth IRA is a great way to help fund a younger child’s college education. All have broadly similar tax-free benefits with the major differences that 529 plans have a $14,000 (2013) annual tax-free funding limit while the Coverdell is fixed at an annual funding limit of $2,000. A custodial Roth IRA in the younger child’s name may be used to fund education expenses but contributions are limited to the amount of the minor child’s earned income, or $5,000 per year, whichever is less.
Once your retirement is secure and you have fully funded the projected costs of college, it may be time to talk to an estate planning attorney to discuss the options suited to your situation. Any individual can make gifts, tax free, of up to $14,000 per year (2013) to anyone, including a minor or adult child. For children under the age of 18, custodial Gifts to Minors accounts (UGMA or UTMA) are a wealth transfer vehicle often employed by parents and relatives. I caution parents about these accounts because the child gains full control of the account generally between the ages of 18-21, depending on your state’s laws. Once the full owner, the now-adult child is free to use the funds as he or she pleases, and is under no obligation to use the funds for college or any other purpose intended by the original contributors. There is also a gift tax exemption for an unlimited amount of college education or medical expenses paid on behalf of any third party. But you must make the payments yourself directly to the college or medical provider to qualify for the exemption.
The last big ticket item that clients consider is helping a child purchase a home. A great idea as this provides them with a steady roof over their heads, can help their credit and gives them some equity of their own. The usual caveats apply regarding making sure your own needs are taken care of first, with the addition of some major cautions around gift tax, credit and ownership issues that are too complex for this short article. If considering this option, consult with your tax advisor and/or attorney first.
A version of this answer was originally published at Nerdwallet
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With college education costs now a major financial planning challenge for all but the wealthiest households, students and their families can no longer assume automatically that a college education will be the “no-brainer” investment it has long been considered. Many students leave college these days with crippling debt levels they can ill afford to support.
In response, there is a new movement to rank colleges on more than just the basic quality of their education. Where the elite schools – Harvard, Princeton, Stanford etc. – once dominated all the “top college” lists, the new rankings feature some unexpected winners. Payscale ranks colleges based on ROI, the expected lifetime return on investment for the cost of an education. Harvey Mudd College tops their list with usual suspects Stanford at #10 and Harvard #14. Washington Monthly features their “Best Bang for the Buck” rankings that use student loan default rates as a key metric. Amherst tops the WM all schools rankings.
Students, and parents, are also advised to note the sizable gap in average starting salaries for college grads – 2013 Engineering grads received an average $62,000 out of school while Humanities majors earned $37,000. The costs for the two degrees are the same, but the earnings discrepancies only increase over the life of a career.
If there was just one simple program that could dramatically reduce the incidences of teenage pregnancy, drug use, and crime, as well as increase both high school graduation and employment rates for at-risk populations, I would say we had found something truly momentous.
According to this Planet Money podcast, the state of Oklahoma has found and is implementing just such a program … and it is universal pre-school.
This is not just wishful thinking. The OK project is based on hard data of social outcomes and cost benefits that have been documented over fifty (yes, that says “50”) years by various research projects, see here and here. A recent University of Chicago study finds a lifetime financial return on investment of 300% for preschool spending.
The Oklahoma project is being funded by George Kaiser, one of America’s richest 20 persons according to Forbes, who says he was persuaded by the research data that preschool had the highest rate of return of any possible social program he could support.