The Demographics of Wealth
How Age, Education and Race Separate Thrivers from Strugglers in Today's Economy
Essay No. 2: The Role of Education
New research by the Center for Household Financial Stability shows that there's a strong correlation between education and money. More of the former often leads to more of the latter. However, correlation is not causation—there is no guarantee that more education will lead to more wealth. Many other factors might be in play, such as natural ability, family environment, inheritances and even health. It's entirely possible that what's learned in the classroom has much less influence on lifetime earnings and wealth accumulation than most people believe. In fact, your ability, family background, inheritances or health might be responsible for some—perhaps a large part—of your success even if you hadn't received the education that you did.
These and other connections that may exist between education and wealth are examined in this second essay in our “Demographics of Wealth” series. (Read the first essay, which looked at the link between race and wealth.) All of the essays are the result of an analysis of data collected between 1989 and 2013 through the Federal Reserve’s Survey of Consumer Finances. More than 40,000 families were interviewed over those years.
For this essay, only those heads of families at least 40 years of age were studied – because by age 40, the vast majority of adults have completed their formal education. These family heads were broken down into four groups: those without a high school diploma; those with only such a diploma, a GED or a vocational/technical certificate; those with exactly a two- or four-year college degree; and those with a bachelor's degree plus a graduate or professional degree.
Our key findings: