Say “HI” to Teacher Man, Y&T.ca's staff writer!
Hello fellow personal finance readers. I go by the pen name “Teacher Man” due to the fact that I recently graduated from university and am in my second year of teaching high school. About 9 months ago my partner and I started a website called My University Money. It is aimed at helping young people (with a specific focus on post-secondary students) and just talking about financial and student lifestyle issues in general. Young & Thrifty was one of the first bloggers to really reach out to us and give us a little recognition when we were just starting off.
Is It As Simple As Degree = Money?
It used to be considered common knowledge that the way for middle class people to get ahead in life (or really any class of people for that matter) was to do well in high school, apply to a bunch of universities/colleges, and then go to the best one that you got accepted into. The consensus was that borrowing money to get a degree from a well-respected institution of higher learning was the best investment you could make. Universities and colleges across the land are still reading from this gospel, but it is not nearly as true as it once was. More and more often we read stories in the newspaper of people with fine arts degrees who are $120,000 in debt and have little job prospects. Now, there are obviously some benefits to school that can’t be measured by dollar signs, but it is worth noting that the once sacred truth that you had to attend a university or college to be successful is no longer valid at all. Don’t take my word for it, go ahead and Google the resumes of Bill Gates, Steve Jobs, and Mark Zuckerberg. You won’t find a university/college degree.
Teacher vs Labourer
We aren’t all computer geniuses who can drop out of post-secondary school and become billionaires, but here is more of a layman’s example. When detailing potential career paths for my students I often use my career as a teacher for one part of the case study, and for a comparison I use my high school friend Chase. Chase and I both grew up having fathers that harvested wood for a living. While I decided on one -40 day that being a teacher was a good idea, Chase likes working with machines and was a solid operator. After high school I went to university and Chase went to work in the oil patch out in Alberta. I spent 5 years in school and came out debt free with a pair of degrees, due to the fact I had a great summer job. This put me ahead of the vast majority of graduates, but let’s compare my financial situation to Chase’s:
Chase earned an average of $65,000 a year during those 5 years. I’m not sure of his exact investment levels or returns, but let’s say he listened to his know-it-all teacher buddy and saved the cardinal rule of 10%. Now he actually made some great investments in property so I think he did much better than the average in terms of investment returns, but let’s say for the sake of argument he received an annualized return of 8%. After 5 years TM is leaving school with a net worth of $0 (give or take the value of an old car). Chase has $38,132.91 in the bank.
But now it’s time for our favorite staff writer to catch up right? I mean, it’s common knowledge that someone with two fancy degrees (ok, so my degrees aren’t that fancy) should make a lot more money than a labourer right? WRONG. As one of the best paid teachers in the world, I start at $50,000 a year, and max out around 80K. I would imagine Chase’s salary will grow substantially as well, but again, let’s be conservative in order to prove my point and say he continues to make $65,000 (easily doable anywhere in Alberta and Saskatchewan right now).
If we check in on TM and Chase in another 5 years and assume that I have been saving 10%, and getting the same returns as my buddy I will have $35,199.61 in my investment account. My hard working friend will have accumulated $94,162.66. After twenty years from the date of our high school grad (*shiver at the thought of awkward reunion*) if we keep the same assumptions, Chase will have an investment nest egg of just under $300,000! The teacher guy will be severely trailing his friend as he brings in $184,642.54 and this is factoring in that I should be making a little more income that my buddy is at that point. Even assuming that I would be able to able to save a little better percentage of my money at 15%, I would still trail my friend who made the “wrong” decision out of high school.
I Still Like Being Me, But…
All this being said, I would not trade places with my friend for anything. I had an unbelievable time during my post-secondary education and enjoyed experiences that I would have never got while working. I simply want people to understand that they can choose not to believe the multi-billion dollar propaganda machine that is post-secondary education. My buddy has great work connections at this point. He has investment experience that I can only read about. He has the financial backing to start his own business if he so chooses, and he is making more money than me! These are factors that I would not take lightly, and he single-handedly proves the point that there is not one singular path to financial success.
Why Jam A Square Peg Into A Round Hole?
North America is in dire need of tradesman, hard workers with heavy equipment experience, and a variety of other less publicized careers. If you like doing this work why should you try to force yourself through years of university or college? My example above illustrates the fact that compound savings often beats increased income, and I would guess that at Chase’s real income over the next 20 years, if he were to consistently save 10% and invest in basic index funds, he would have more in the bank at retirement than many lawyers, teachers, government employees, and the majority of people with degrees. Make your own choices when it comes to what sort of career you want to pursue, and try to ignore these “rules for success” that people put in place 40 years ago. They are not relevant today, and can actually be harmful, especially if that is not what you want to do.