This is what individual experts have to say generally about an issue that affects each person differently—if you want personalized advice you should see a financial planner.
Think Outside the Box
It’s hard to argue that your student would be better off not going to college, given all of the statistics to the contrary: Just one example, according to the Bureau of Labor Statistics, those with a bachelor’s degree have median weekly earnings of $1,156, while those with an associate’s degree earn $819 (it drops to $756 weekly if you have some college and no degree).
But it’s true that it is not the only path to success and that attaining a four-year degree isn’t in the cards for a lot of people, most obviously those who can’t afford to go at all or who take on an enormous amount of debt to do so. What is important is that if they go, they intend to finish, and understand the debt they are taking on. You don’t want to start and realize it isn’t for you, and then end up stuck with tens of thousands of dollars in debt for a degree you can’t benefit from.
That’s why being flexible and considering alternate paths is so important—we have in our heads that the way to be successful is to go from high school straight to a four year college, then to grad school or into the “real world,” where we’ll steadily work our way up, uninterrupted. But this is rarely ever the case, and it doesn’t have to be for your students. It’s hard to say that you don’t need college to be successful when many industries cling to this old-school notion of success and respectability, but there are also industries in which you don’t necessarily need a degree (or an Ivy League degree) to succeed.
“There is a lot of money to be made in the trades [like] carpentry, plumbing, HVAC, [and] electrical, as well as IT, and none of these require ‘traditional’ schooling,” says Eric Jorgensen, who joined the Navy at 17 and later became a journeyman electrician before earning two Master’s degrees and becoming a CFP. “A word of caution, all of them will require some degree of grunt work in the beginning, although in my experience the more you apply yourself the quicker you will progress to more complex tasks.”
That said, another point to consider is that your students do not need to decide, at 17, what they will do for the rest of their lives. The 2017 Teens and Money survey from TD Ameritrade is illuminating in the ways that young people are approaching life after high school: a third of respondents said they were considering a gap year between high school and college, a good idea that’s been gaining steam the past few years (see: Malia Obama) as students and parents grapple with the high costs of higher education.
In that year, or years, students can work (and save, ideally), travel, or hone any number of marketable skills. They may also choose to take courses at a community college so they don’t have to spend as much time (and money) at a more expensive institution taking pre-reqs that don’t add much value to their lives or resumé.
And as Roger Whitney, a Fort Worth, Texas-based financial advisor and host of the Retirement Answer Man podcast, said, they also don’t need to complete their degree in four years. They can go to a community college first, or spread their degree over more years so they’re able to work more during school to take on less debt.
Another point of interest from the TD survey: 20 percent of respondents say technical or trade schools are an option. While bachelor’s degree holders typically make more than non-degree holders, that’s not true in every line of work, says Brianna McGurran, a student loan expert at NerdWallet. “Airplane mechanics, for instance, earn median salaries of $60,000 a year with a mechanic’s certificate and 18 months of experience,” says McGurran. And many community colleges offer occupational training, which you may be able to pay for with federal financial aid like a Pell Grant.
Sometimes, you can apply for scholarships, even if you’re not attending college that year, and make a case for still receiving the financial aid. And you can apply for other scholarships, like the Work Ethic Scholarship Program, which offers aid to people learning trades.
Building Wealth When You’re Young
Ok, that’s the hard stuff. As for building wealth, the old, boring practices still pave the best path: Create a budget, open a retirement account as soon as you can, work hard and live below your means. For your students, this might mean moving away from Denver at the beginning of their working lives, or picking up a spare gig on the side for extra cash. As with every other generation, it isn’t going to happen overnight for most people—hence that the process of accumulating wealth is referred to as “building.”
That said, it’s good of you to consider this aspect of their lives now, as this is a crucial time for building life-long habits.
“To build wealth, think about how you can effectively save in a consistent way,” says Chantel Bonneau Stewart, a certified financial planner and wealth management advisor at Northwestern Mutual. “It is crucial to build good habits when you are young around your finances, and in order to do that, start small, even if you cannot afford to save much, and build on that good habit.”
For example, put away $20 per month into your savings or an IRA, and challenge yourself to steadily increase it. The point is to build the habit when you’re young.
Those are important skills to build if you go off to college, where you’ll be on your own, in many cases, for the first time, but it’s important if you stay at home, too. “They will want to have a plan for building their security while at home with a trajectory to moving out,” says Bonneau. “That should include paying a portion of bills and rent so they get used to that responsibility.” Bonneau provided this budget sheet, which is pretty comprehensive for a recent high school grad.
Krista Neeley, managing vice president of Appreciation Financial, suggests explaining to your students that personal finance doesn’t have to be frustrating or confusing—in fact, it’s empowering to be able to take control of your money, even if you don’t earn a lot of it. Changing your mindset won’t get you everywhere, but it can go a long way to helping you achieve financial security.
“I attribute most savings habits are difficult for people because they perceive it as a loss, rather than a replacement,” she says. “We have too many of us who seek instant gratification rather than long-term longevity benefits. When we think of savings as someone or something taking away from us rather than a gift we are giving to ourselves, it can make it harder to save. We have so many bills to pay or financial responsibilities to meet, sometimes we forget to get ourselves onto that list.”
And she insists hammering home that saving when you’re young is the most important thing anyone can do. Don’t wait.
Specifically, look into opening a Roth IRA, an investment vehicle that’s been increasing in popularity in recent years.
“While an IRA is meant to help you save for retirement, you can withdraw money you’ve saved in a Roth anytime without penalty, so it can also be a backup savings account,” says Nerdwallet’s McGurran. “Your money will grow faster than you expect.”
What a lot of this comes down to is knowing yourself and what you want out of a career and your money. Invoking billionaire investor Warren Buffett, Steve Millstein, a CFA and CPA who runs the personal finance blog Credit Zeal, says the best advice he has for young people is to invest in themselves.
“When I say invest in yourself, this of course doesn’t have to be the traditional path or pursing a college degree, as that is just one of many options,” says Millstein. “With the vast amount of free online courses there is no excuse now to not be a lifelong learner and continue to up skill yourself. Once you have up-skilled you can consider starting a side hustle to provide a secondary source of income which can really help you get ahead. The important thing is to keep learning and make the commitment to becoming a life learn longer.”
