How should you, or your offspring, choose a college major? By picking a field of study that leads to a job with the highest salary? Actually, the answer is more involved than that.
The other day I was playing the Game of Life with my kids again, and I realized exactly how inspiring this board game is for youngsters.
While we were playing the game, which takes you through all stages of life from college to retirement, my youngest son said, “I want to be a doctor when I grow up.” When I asked why he told me it’s because they have the highest salary in the game.
I’m sure once my son gets older he’ll decide on a career based on more than just a Game of Life salary card, but I do hope he decides to take into consideration the financial repercussions of his career path.
I’ve written before about how I believe a college education is typically a solid investment, and even how to leverage Free Application for Federal Student Aid, or FAFSA to lower your college costs. This program, part of the U.S. Department of Education, provides more than $150 billion in government grants, loans and work-study funds each year to over 13 million students.
However, I recently read an article from Fox News focused on a study about how certain college majors have a much higher return on investment than other degrees. While this isn’t overly surprising, the difference in lifetime wages for different majors is enormous.
According to the study, over their lifetime those who hold a college degree earn an estimated $1 million more than someone with only a high school diploma (something that we’ve seen for years now). Now I’ve learned, though, that the difference in lifetime wages of the highest and lowest paying majors is $3.4 million.
Georgetown’s Center on Education and the Workforce released the above-mentioned study on the value of college majors. Their website even has tools that allow you to see the average income in various fields, based on the degree obtained. It also breaks down the average income level for different fields at the state level, so you can see how your state’s workforce compares to the national averages.
The top paying majors unsurprisingly include STEM (science, technology, engineering and mathematics), plus health and business. The majors with the lowest median earnings are in education, arts and social work. In fact, early childhood education majors earn just $39,000 annually mid-career, the lowest among college graduates.
While clearly there is a large wage gap between majors, the Georgetown study does give hope to people interested in fields outside of STEM, health and business. They point out that people in generally low-paying majors who are in the top 25% of their field may earn an equal amount or more than those in the top-paying majors who are in the bottom 25% of their field (see Figure 4 in the study).
Ultimately, our economy needs both teachers and engineers. We need social workers just as we need accountants. It’s easy to obsess over what major could make you the most money, but it’s more important to find something that you enjoy and where you could excel.
In the research for my book, You Can Retire Sooner Than You Think, I found my happy retirees had an average household income of about $98,000 in their peak earning years.
While it might be nice to go after the highest salary possible, remember that, according to my research, if your household had two excellent teachers bringing in $49,000 a year, then you’d both be able to retire happy as long as you’d laid the necessary financial foundation.
A wise person once said, “Choose a job you love, and you will never have to work a day in your life.” While I think this is important advice, I suggest that you understanding the financial repercussions of your chosen career, as well.
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Wes Moss, CFP, is the chief investment strategist for Capital Investment Advisors and a partner at Wela, both in Atlanta. He hosts “Money Matters,” a live financial advice show on Atlanta’s News 95-5 and AM 750 WSB Radio. In 2015 and 2014 Barron’s Magazine named him as one of America’s top 1,200 Financial Advisors. His newly released book, You Can Retire Sooner Than You Think published by McGraw Hill, is available on Amazon, iTunes and at your local bookstore.
Wes writes weekly about personal finance in the “Bargain Hunter Section” for AJC.com, the site of The Atlanta Journal-Constitution. Wes is also the editor and writer for About.com’s Personal Finance blog. Connect with Wes on Twitter at @WesMoss365 and on Facebook at Wes Moss Money Matters. You can also visit his website, WesMoss.com to learn more about Wes, and take his complimentary Money and Happiness Quiz.
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