A college degree itself does not magically confer all of the benefits that college grads typically enjoy—financial success requires more than a sheepskin.
Educational Attainment Predicts Median Family Income
Inheritances: Better-educated people are much more likely to receive sizable gifts or inheritances simply because they are more likely to have better-educated, higher-earning parents who have accumulated wealth.
Bottom line: Educated parents produce both educated offspring and wealth that can be passed down.
Natural abilities: People with higher natural cognitive and non-cognitive abilities are more likely to complete higher levels of education.
At the same time, measures of cognitive and non-cognitive ability also predict success in achieving higher social status, avoiding poverty and criminality, enjoying better health and achieving greater longevity.
Bottom line: More-talented people get more education and do many other things that can lead to greater wealth.
Six Sources of the Partially Spurious Correlation Between Education and Wealth
Family background: The parents’ socio-economic status (social class, occupation, education, income, wealth) contributes to the child’s success as an adult in many different ways.
Bottom line: High-status children get more education and enjoy other economic and financial benefits.
Six Sources of the Partially Spurious Correlation Between Education and Wealth
Assortative mating (“like marries like”): The link between education and earnings and the tendency for highly educated people to marry each other effectively doubles the college wage premium for these families. Financial decision-making also may be improved with two educated spouses.
Bottom line: Your education creates wealth and attracts an educated spouse.
Six Sources of the Partially Spurious Correlation Between Education and Wealth
Incentive to become financially knowledgeable: High-earning families have a strong incentive to learn how to shift middle-age income into retirement.
Bottom line: High income during working years creates wealth and spurs financial learning.
Six Sources of the Partially Spurious Correlation Between Education and Wealth
Better health and longer lifespans: People who get more education are healthier, on average.
Better health extends working lives and lengthens healthy retirement years.
Longer-lived people collect more from Social Security and private pensions and their investments have more time to grow.
Bottom line: People who get more education tend to be healthier and wealthier.
Six Sources of the Partially Spurious Correlation Between Education and Wealth
