How ECON 101 Doubled My Retirement Fund and Other Lessons I Learned From College

"University Hall IMG_4993"​ by OZinOH is licensed under CC BY-NC 2.0

In this age of online education and learning everything you need to know from YouTube, it’s easy to ask the question, “Is a college education worth the investment?” The cost of four years of schooling will put you back quite a chunk of change, so feeling apprehensive is a valid concern. Years ago, I remember a close friend sharing with me that she wasn’t sure the MBA (Master of Business Administration) she paid for herself while working full-time had been worth it. She didn’t know if the job she would attain next would justify all the time and money she had just spent. While she can quantify her answer through her new salary and job benefits, deciding if going to college is worth it, is a trickier proposition. The experiences you gain outside the classroom and the life lessons you learn during those transformative years, muddy up a true cost-benefit analysis. When I think back to what I remember from my university days, these are the life lessons that have stuck with me:

• People behave differently in groups than they do individually. (From a Psychology class called “Collective Behavior”)

• Use action verbs in your writing instead of “be” verbs. (From every English and Journalism class I took)

• You can learn many words and phrases in Spanish or any foreign language, but everyone, everywhere understands the universal language of the smile, wave and laugh. (From Spanish classes and a quarter abroad spent smiling, waving and laughing)

• In a pre-Internet world, I learned ways to find out information that most people didn’t realize were available. (Investigative Journalism)

x

All of these lessons have stuck with me, but none of them added money to my pocket like my time in Econ 101. Despite it being my least favorite class, and the one which earned me my WORST grade in college, Economics 101 has more than paid for my college degree. To this day, I can’t explain the relationship between the sale of butter and guns, but I still tell everyone I know about my professor’s advice on the compounding effect of mutual funds.

“Invest early because you don’t want to miss out on the last double,” he said, and these words have stuck with me and have literally changed my life. He urged us to start putting money into a mutual fund in our twenties, instead of starting in our thirties, which would double our investment portfolio when it came time to retire. The technical term for this is called the “Rule of 72” and The Motley Fool describes it as “To use it, simply divide 72 by the rate of return you expect to earn on your investment. The result is an estimate of the number of years until that money will be twice the size of when you started with it.” Basically, the sooner you start putting money away, the higher likelihood it will grow into a larger sum than if you begin later.

Now that I am, gulp, 20 years out of college, I know for a fact his advice is true! I’ve already experienced this doubling effect, and I’m forever grateful to him for planting his investment advice into the minds of a classroom full of 20-somethings with no income and no thought about investing or how our money could grow. I’m sure when the time comes to retire and my last double hits my account, I’ll be thinking back to college and saying “It was DEFINITELY worth it!” And I will be thanking my old econ professor all the way to the bank!