Investing Your Money Vs. Going to College

If you had $50,000 and could choose between investing that cash versus using it for college, which option would you take? Given my own personal experience, I would use the money for college. Here's why:

Stocks don't always appreciate. The tech bubble of 2000 and the housing bubble of 2007 taught us that stocks can suffer enormous corrections. If you had invested $50,000 in Celera back in February of 2000 or in Fannie Mae in October of 2007, your investment today would be worth $1,690 and $297, respectively. Such monetary depreciation wrecks havoc on your personal finance situation (as it did with mine when I purchased Celera in early 2000).

The stock market doesn't always appreciate. The American Great Recession of the late 2000's taught us that the old adage of the stock market appreciating at a yearly rate of 11% isn't always true. In March of 2009, the S&P 500 dipped to 683 points, a value that had not been seen since 1995. Had you purchased an S&P 500 index fund in 1995 and decided to cash it in 14 years later, you would've seen no growth on your initial $50,000 investment.

College pays. However, had you spent the $50,000 on a 4-year college degree, you could've expected to see a sizeable return on your education spending, with your yearly earnings increasing by over 70%. According to the U.S. Census Bureau, college graduates who hold a bachelor's degree can earn a yearly average of $52,200, while high school graduates can expect a yearly average of $30,400. Thus, education spending is a reasonable investment in the arena of personal finance.

Stocks can pay off too. However, there are certainly numerous exceptions. Had you invested your $50,000 in a stock like Ford when it was trading at its lowest value in 10 years (November 2008), you'd have gained almost half a million dollars. BP, which crashed and burned in June of 2010 due to an unfortunate oil spill, has rebounded nicely in less than a year; your $50,000 investment with this company at its lowest trading point would've netted you over $34,000 by now.

School does not equal money. I know plenty of people who spent years attaining degrees that they now cannot pay off. Taking on insurmountable student loans and losing potential wages due to the time spent in school are two realities of education spending. Speaking from personal experience, I myself lost $250,000 because of graduate school.

In summary, I would still support education spending over investing the $50,000 because education itself is a valuable resource that no amount of money can replace. You can lose your high paying job or your investments, but no one and no economic condition can take away your knowledge. Having knowledge of how you can start over and make money, even if you've lost everything, is the true value of an education.

More from this contributor:

How to Get a Personal Loan for Debt Consolidation with Bad Credit

10 Things to Consider Before Buying a Dividend Paying Stock

Stocks, Mortgages and my 401(k): Money Lessons Learned in 2010

References:

"The Big Payoff: Educational Attainment and Synthetic Estimates of Work-Life Earnings", The U.S. Census Bureau

Halina Zakowicz, "First Person: My $250,000 PhD"Associated Content.