Financial Management, Personal Finance & Planning Basics 101 – Investing in Education 6

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Education is a fundamental right for everyone and key to the future of any country. Education has its price everywhere—but the only thing more expensive than investing in education is not investing in education. Inadequate education produces high costs for society in terms of public spending, crime, health, and economic growth. No country can afford to leave too many of its children behind and not to help them achieve the competencies needed for a self-fulfilled life in economic independence.

But the main challenges in education differ across countries and continents. The industrialized world faces the impacts of demographic change, such as a shortage of skilled labor and ageing societies. Emerging countries need to respond to increasing demand in education. And in some parts of the world, it is still not a given that every child has the right to go to school—and, hence, a big share of the population cannot read and write.

Despite these differences, there are common challenges. For example, the “inheritance of educational status” is a global problem: people’s education achievement largely depends on their socioeconomic background and the educational status of their parents. Although some countries provide more equal opportunities than others, it remains a challenge everywhere to improve the chances of those children lost to inadequate education.

But education budgets are limited, especially in times of economic downturn. Thus, it is worth comparing countries that have decreased and augmented their education budgets during the crisis—and evaluating the consequences of these decisions. If, on the one hand, investments in education are vital and, on the other hand, budget constraints restrict the available resources, investments should be as effective as possible. The question then is: where does it make sense to invest most in education?

Researchers generally agree that investing in early education has the highest returns. As the Nobel laureate James Heckman has shown, early investments enhance equal opportunities and higher achievement at the same time. How can this be applied to education financing structures in different countries? And given the fact that early childhood education is often very costly for parents while school education is usually free, what should be the financial contribution that families make to the education of their children?

An alternative view of investments in education is that they should be higher where the problems are greatest: that would mean greater effort to tackle inadequate education and more money for programs for children who are lagging behind. Research shows that inadequate education is a problem for the whole of society—even the elites—and that everyone benefits from minimizing the number of low-educated people. Is it possible to invest in more quality in education? What form of qualification will produce the best teachers and pedagogues? And what mechanisms should be used to allocate resources?

Education remains one of the most important duties of any government: it is a public responsibility to provide access to high quality education for everyone. Therefore, public investments need to ensure a good educational infrastructure for lifelong learning. But can private organizations, companies and nonprofit organizations provide additional supply. Could they become substitutes or should they instead function as supplements to public institutions?

Personal finance is the financial management which an individual or a family unit performs to budget, save, and spend monetary resources over time, taking into account various financial risks and future life events.[1] When planning personal finances, the individual would consider the suitability to his or her needs of a range of banking products (checking, savings accounts, credit cards and consumer loans) or investment private equity, (stock market, bonds, mutual funds) and insurance (life insurance, health insurance, disability insurance) products or participation and monitoring of individual- or employer-sponsored retirement plans, social security benefits, and income tax management.

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