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Education as an Investment, Essay Example

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Socially education is esteemed as the only means a parent can invest in his or her children’s future. Philosophically, education is the key to a happy, good, successful satisfying life. What about economically? When economic principles of analyzing investments are applied to education, the results are always astounding. From a businessperson’s perspective, education might be the best investment venture a man can commit to.

In contemporary economics, investment analysis usually employs ROI (Return on Investment) to measure how efficient a financial expenditure is. ROI is a popular scientifically sound metric that is widely used due to its simplicity and versatility. In a snapshot, modern investment parameters state that an investment venture must post a positive ROI if it is to be termed efficient and beneficial. If the ROI is on the negative, such an investment venture should be terminated and or limited in terms of resource allocation.

If we were to apply a similar principle in measuring the continuous investment of resources to education, as an individual or government, then education would sound much the same as printing legal tender at home. This is especially when the subjects of analysis come from minority and low-income families.

Many scholars and sociology experts believe that the US economic future is consequent to successful investment in education. President Barrack Obama has committed his administration to investing billions of dollars in education reform. The base of such decisions is in amplifying the socio-economic status of the young people in the country.

To elaborate on the positive ROI of education, let us use the 2,800 US federal TRIO education programs. These programs assist the low-income students in college education by providing private instruction, counseling, tutoring, mentoring, induction and cultural enrichment of students who could otherwise not make it in college.

ROI Analysis of Education: Case Study

The program costs $7,350 per student. The returns start almost immediately since five times the invested amount is then received back by the government from the additional taxes collectable from all TRIO participants. The TRIO students always graduate from college at much higher rates than the needy students who never receive similar support services. Consequently, the society benefits from having better personnel (educated), improves service delivery, performance efficiency and reduces wastage of time and resources.  It also eliminates one potential criminal from the youth. If such youths were without education, research has shown that 53% of them would be criminals by the time they are 30 years old. Such criminals would then be fed, guarded, treated and hosted by the state free.

The TRIO students then promise and usually commit to mentoring, funding and inspiring others needy students once they settle in a career. That means, they contribute additional funds for the program (construed here as investment capital). That is not all. The TRIO college grads will make a much higher income consequent to education and that will generate a continuous provision of greater tax revenue for the government. When all these benefits are totaled and quantified, it is easy to see that the federal investment capital in the TRIO programs has a positive ROI, one that is overwhelmingly incomparable to the initial capital.

The amount spent to educate a single person is incomparable to the amount generated from and resultant from the opportunities the person gets after that education. The amount spent is tuition fee, books and other education charges since birth are usually earned back within three years of employment and even in a shorter period if the individual continues with higher education. As such, going by ROI, education is a great investment venture for a nation and for an individual.

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Impact Investing: Why invest in education?

essay on education as investment

Did you know, investors around the world are making impact investments to unleash the power of capital for good? In this article, we would like to provide you with the core characteristics of impact investing digging into the education field.

Impact investing definition

Impact investing is first and foremost an alignment of an investor’s beliefs and values with the allocation of capital to address social and/or environmental issues. Impact investing refers to investments “made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return”.

Impact investments can be made in both emerging and developed markets and target a range of returns from below market to market rate, depending on investors strategic goals.

The growing impact investment market provides capital to address the world’s most pressing challenges in sectors such as renewable energy, sustainable agriculture and affordable and accessible basic services including housing, healthcare and education.

The Global impact investing Network defines the Core Characteristics of impact investing with the following four notions:

This is the commitment of the investor to measure and report the social and environmental performance and progress of underlying investments, ensuring transparency and accountability while informing the practice of impact investing and building the field.

Impact investing in Education

Many will agree in recognizing Education as the most powerful investment in our future. Research shows that education can make a lasting difference in people’s lives and it is not just good for individuals but also for nations. Investing in education is not just the right move but it is also smart economies.

Education lead path towards health, empowerment, and employment. Evidence shows that each additional year of education boosts a person’s income by 10% and increases a country’s GDP by 18%. Some investigations estimate that if every child learned to read this will mean 170 million fewer individuals would live in poverty. By 2030, over 600 million more children will need to be enrolled in school to achieve basic education for all.

So how can we get more people in school, learning skills that will help them to heal wounds and rebuild their societies?

Impact investing challenges

Financing is one of the key barriers to growth within the education sector. Most of impact investments are made to expand school infrastructure and capacity.

Impact investors are looking to strengthen the ecosystem which surrounds the emerging sector to offer quality education in a sustainable manner.

The objective is for institutions to be sustainable and managed independently, in order to generate market demand and drive intense competition between schools.

Invest in Education: An overview

Many low-income countries still lack the resources and capacity to provide Governmental universal basic education of quality. The funding gap needed to provide basic education for all children, youth, and adults has increased to US$ 26 billion.

Education impact investing could mobilize new funding , enable private sector engagement in both public and private education service delivery, and introduce approaches or tools to improve efficiency in the service delivery, promote innovation in teaching and learning methods, and monitor outcomes and systemic effectiveness.

Impact investing in education remains nascent but could deliver immediate financial returns while reaching the most vulnerable beneficiaries.

Investors look at the risk and return of an investment as well as the positive and social impact it may generate.

Because of the perceived lack of innovation in education, private capital can fill a gap through funding direct service provision and spur innovations that increase equitable access, enhance quality, and ensure retention.

Impact capital differs from commercial private capital in that it seeks to reach the most vulnerable beneficiaries and differs from private philanthropic capital in that it seeks to apply market-based innovations to ensure financial sustainability, if not financial profit.

The challenge for impact investors is to catalyze models and approaches that target high impact and financial sustainability simultaneously.

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Invest in education: recommendations.

Investing in Education is a question of mindset. That’s because the decision to investing in this field has a far-reaching impact: on the environment, the economy and society. Investing in Education is investing in tomorrow with a proven commitment to a better world.

Sounds like a good plan? A few key recommendations:

Impact investing has emerged in recent years as a potentially promising tool to mobilize additional capital toward the goal of broadening access to quality education.

Impact investing includes a range of funding activities in various sectors that combine financial return with social and environmental good.

Impact capital can help to:

Models that target higher-income populations with greater spending power present more investment opportunities and can offer attractive or even commercially competitive returns.

Free self-assessment  Are you delivering inclusive learning?  By promoting inclusive education, we mean that we strive to meet the diverse  needs of all students in a way that is respectful, accepting and supportive  Benchmark your institution against best practices!

Invest in Education: Types of investments

There are several types of investments within the educational sector. School infrastructure investments are the most prevalent and are easily measurable. There is also investment in people that include loan programs, vocational training, teacher training. We can also recognize investment in technology and service models including software development, distance learning programs, and integrated management or back-office support to reduce costs and improve quality, with deals that can be very small and highly risky. Finally, we can also have investment to consolidate the education ecosystem aiming at building a more robust education marketplace.

The investment channel chosen by an investor depends on how much capital it seeks to deploy and how much risk it wants to take.

By investing through intermediaries, investors can deploy more capital, enabling them to take on large-scale projects or spread risk across a range of models with relatively lower transaction costs.

When private commercial funding accounts for an estimated US$500 billion, impact investing comprises about US$3 billion of that subset, representing only a tiny share of overall education funding.

The sector is still in its infancy, meaning that large international players still dominate the landscape and most investors are taking a gradual, opportunistic approach for building their education portfolio, notably due to limited examples of success heightening perceptions of risk. Most finance-first oriented impact investors have targeted middle to upper-middle income customers who have meaningful ability to pay for various for-profit education models, that have proven to also be commercially attractive.

Larger funds and institutional investors tend to seek investments with low transaction costs, lower perceived risk, and greater potential for returns to capital.

Invest in Education: limitations for impact investors

We must recognize also some limitations for impact investors such as lack of innovative education models and innovative financing structure. We also have lack of track records of successful interventions that increase the perception of risk and constrained definition of success that is informed by traditional/commercial investing principles.

Impact investment builds up the education sector as a continuum, paralleling the maturing of a national education system:

Strategies for Complementing the Public Sector are transitioning gradually from grants to investments, from private funding to government funding and/or take an already proven business model and extend its reach to more vulnerable populations.

For many impact investors, the ultimate goal of sustainability is demonstrated not only through financial profits and successful exits for them but also through preserving capital until community or the government has the capacity to take over the operations and funding.

Education impact investing has exciting potential to mobilize new sources of funding and develop innovative approaches to education aiming at broadening access to quality education for all.

Models that do generate financial returns are usually targeted toward middle and high-income population.

Instead of focusing on discrete, small deals one-by-one, funders may choose to channel their investments through innovative intermediaries who are able to deploy larger amounts of capital more efficiently; catalyze innovative tools and service providers who are enhancing quality while reducing costs; support the broader education sphere for a healthier marketplace where private and public models can co-exist in the future.

Invest in Education: Supporting Africa

Several studies have indicated that investment in higher education and GDP were positively related in African countries and that higher education had broad benefits for individuals and societies. (Bloom et al, 2006 & 2014)

Knowledge is the single most important engine of growth and the driving force of economic performance in the OECD countries. (Marginson & van der Wende, 2007)

Participation in higher education tends to increase individual’s earnings and induce growth that benefits the entire society, there is an intense debate about who should bear the responsibility for the investment in higher education.

Three kinds of arguments are put forward to justify the allocation of public resources for higher education.

In response to the mismatch between supply and demand, private universities are growing steadily. Distance education is a strategy that governments may pursue to face budget constraints, but which raises quality issues. (Schendel & McCowan, 2016). The most effective interventions to boost learning appear to be the ones related to teaching.

The development of technologies which help officials to better manage schools and the entire education system is another possible field where technology can be useful.

Recommendations to structure impact investment strategy:

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essay on education as investment

essay on education as investment

Education Is A Good Investment Essay

essay on education as investment

Excerpt from Essay :

The reason for this is that there are diminishing returns to education investment. In many parts of the world, investment in female education has lagged that of male education, and as a result, there are greater incremental gains in investing in girls, because they have further to gain. Thus, investing in educating females yields greater returns than investing in men, who usually have already received significantly more investment (Psacharapoulos, 1994, p.1327). Likewise, education in rural areas tends to yield better returns -- the value of investment where there has been little before is greater than the value of education investment in areas where there already was some (p.1328). The rate of return on investment money in sub-Saharan Africa was found to be over 13%, versus less than 7% in OECD nations (p.1331). Well-Being If Psacharapoulos' work focused on the broad-based economic benefits of education, that is not the only perspective under which the call for greater investment in education is supported by the literature . Villa (2005) uses the perspective of people's well-being. It is reasonable to assume at least some correlation between wealth and happiness -- at least to the extent that one is wealthy enough not to worry about food and shelter. But Villa goes further, and determines that social outcomes are also superior -- people who are better educated are happier, and more satisfied with their lives, than people who are not. Education provides greater security, but it also provides more opportunity, in particular to pursue dreams and achieve a level of actualization. Methods of Investment It is an interesting question, if one accepts the proposition that increased education investment is valuable, to examine if the type of investment in education matters. Schmit, Monteiro and Omar (2014) investigated a…

Sources Used in Documents:

References London Economics (2012). Assessing the deadweight loss associated with public investment in further education and skills. BIS Research Paper Number 71. Retrieved May 18, 2015 from Psacharapoulos, G. (1994). Return on investment in education: A global update. World Development. Vol. 22 (9) 1325-1343. Schimit, P., Monteiro, L. & Omar, N. (2014). Cash transfer program and education investment: A model for social evolution. Communications in nonlinear science and numerical simulation. Vol. 19 (3) 570-577. Solesvik, M., Westhead, P., Matlay, H. & Parsyak, V. (2013). Entrepreneurial assets and mindsets. Education + Training. Vol. 55 (8/9) 748-762.

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Essay On Investment In Education

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Why is this article even being written? Of course, people should invest in education. There is no question that resources, whether that be time or money or effort, should be allocated towards education. On his very favorite podcast The Joe Rogan Experience, comedian, TV show host, sports commentator and podcaster, Joe Rogan once noted, “Isn’t the goal, and wouldn’t it be nice, to have less dumb people?” This statement, no matter how crass or blunt it may seem, cannot be truer. However, the truth is that the figures just do not reflect this.

There are a several ways to look at the idea of investment in education .

Beginning with oneself, then to a federal or government level, and then a global one. Most people are familiar with the first level of education investment, the personal choice. People have to be willing to take on the commitment of getting a proper education. For most households, this usually falls on the parents of the child. The parent must want to invest in their children’s education and provide for them the resources that they need to succeed. Then at a certain age, the onus will fall upon the student. They must want to continue their education and see what the years ahead have in store for them. Now faced with the majority of parents and students will naturally want to invest in education. But the unfortunate reality is that in most parts of the world, education is a luxury that few can afford. Sure, in developed nations education is readily available to the point where it mostly takes for granted, but the rest of the world is not so lucky.

The sad thing is that some students and families may want to invest in education, but they have no means to do so. It is why support from the federal government is so crucial.

Most politicians and parties will often use education as the main talking point when they are trying to get elected or seek to get the people on their side. Unfortunately, promises surrounding education are often left by the wayside or under delivers. It is most likely because school mostly sees as something that does not generate revenue. It is considered to be a service that provides to the people, often for free or at cost. It is seen, as an expense. To call this viewpoint sad would be a massive understatement. Politicians and governments that look at education in this manner are losing out on untapped potential. By supporting, building and funding education countries can develop highly skilled professionals that can not only contribute to society on a personal basis but also to the nation’s health through taxable income. Educational institutions may also produce entrepreneurs that can build the business (not just to the scale of mom and pop stores), but large enterprises that may potentially employ more civilians. However, by ignoring people’s innate need to learn and be curious, these so-called leaders are only increasing the burden placed on already-strained social systems like welfare and food banks. Now, with that said, there is a noticeable difference between how one group of people from one part of the world views and approaches education than another group of people from another part of the world.

Cultural differences do play a part when it comes to education. One cannot merely investor have their parents invest in the teaching if it is not something that culturally enforced. Take the Japanese culture for instance. Japan has one of the highest, if not the highest, literacy rates on the entire planet. A strong emphasis placed on achieving and maintaining good grades and getting into prestigious schools and programs. Students are not just expected to attend school during the day, but also attend “cram school” in the evenings. This additional schooling is on top of extracurricular activities, homework, and household chores. Contrast that with most of sub-Saharan Africa, rural parts of South America, and even places in the United States, where the focus of a child’s development does not revolve on receiving an education, but rather merely surviving and putting food on the table. It is in no way stating that they are less deserving of an education, but rather their priorities are different. However, if people of different cultures gave an ability to communicate with each other and share ideas, it may be possible for the concept of placing education first to spread throughout the world. It will undoubtedly receive a knee-jerk reaction, as most new things do, however, the fact remains that it is called investment for a reason, in hopes that it will blossom and grow in the future.

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3 thoughts on “Essay On Investment In Education”

Getting an education depends upon so many things as you mentioned. And yes, where and to whom you were born certainly will make a massive difference. However, it also is up to the individual to take the steps necessary to educate themselves no matter where they start out in life. I’m not saying that it’s easy, but we’re each responsible for our own education in life I think.

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Well said. Bottom line, it’s all up to an individual to gain access to whatever educational opportunities may exist. Thank you for stopping by and commenting.

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Whether Education an Investment or Consumption

Globalisation has led to a considerable growth of the economic importance of knowledge. Knowledge is a resource which has become a decisive factor in economy and developmental policy. The generation and propagation of knowledge holds a key position for economic and cultural development in industrialized as well as in developing countries. There is growing demand for academically trained experts in such knowledge driven economics and societies. As a result therefore, education has emerged as an industry and investment in education is considered as the much lucrative business. Realizing this importance, government of India has made educational planning a constituent of the total planning process. It has even made handsome allocations for this purpose. the first five year plan (1951-56) made an allocation of Rs. 169 cores of the total plan outlay towards education. The allocation was an allocation of Rs. 169 cores of the total plan outlay towards education. The allocation was stepped up substantially during the third five year plan to Rs. 589 crores and in the sixth five year plan it had increased to 2,524 crores. In the eleventh FYP (2007-12), central government envisages an outlay of about Rs. 2.70 lakh crore at current price (Rs. 2.37 lakh crore) for education. This reflects the high priority being given to the education sector by the central government and represents a creditable progress towards raising the public spending of the centre and the states combined to 6% of GDP. But the question arises.

Goods and services are divided into two categories: those from which consumers derive immediate benefit called consumption, those which are used in production to produce after a long term called investment.

Education is both consumption as well as an investment. As a consumption, it accounts for national development. Sometimes it is regarded as consumption in so far as it is desired for its own sake or in the sense that it is considered to be rewarding and intellectually stimulating in itself. The consumption aspect has also been treated by analyzing the amount spent per head of population, or per student. As an investment its returns are compounded in the form of developed personalities, thought, behavior and resourceful citizens in the society. Education is 100% investment with huge returns and massive growth in human resources. Education yields knowledge, job, money and happiness and the most wanted peace. It is permanent property which can’t be stolen and is always productive. Education can be passed over the next generation, making them knowledgeable, disciplined and a perfect human being and thus it is an investment and not an expense.

In the words of Ellea Kyleal, ‘No investment is more productive than in education and training.’ Three factors are responsible for considering educations as an investment as mentioned below:

At one time education was considered an instrument only for promoting individual’s self-improvement and his social relations. The thinking of ‘education for education sake’ is fast changing. In the present age of maximizing the application of science and technology it has been increasingly realized that one needs to be educated not only to become a better man and a better social being, but he should also be a better creative and productive being In the words of Arn Rand, ‘The only purpose of education is to teach a student how to live his life by developing his mind and equipping him to deal with reality. The training he needs is theoretical, i.e. conceptual. He has to be taught to think, to understand, to integrate, to prove. He has to be taught the essentials of the knowledge discovered in the past and he has to be equipped to acquire further knowledge by his own effort. This is education’s economic role.

An important motivation for individuals to invest in education is that the acquired knowledge and skills tend to raise their productivity and hence earning potential. Education appears to provide not only and initial earning advantage but also a wage premium that increases with time spent in the labour market. Education is not only productive of economic welfare but also has psychic and moral value and is necessary for cultural satisfaction. S. Kuznets says, ‘capital formation; should be broadened to include investment in health, education and training of the population itself, that the population itself, that is investment in human being.’ Dr. Ellea Kyleal avers, ‘From the stand-point of economic development three factors are of basic importance: natural resources, physical capital and human resources.

A Positive correlation between educational system and per capita income is therefore, irrefutable. A large number of studies have conclusively proved that by fat the major factor in economic growth is not natural resources, physical capital and human resources but the residual factors life organization, inventiveness and education. Better organizational skill and sharp inventiveness are the direct results of education.

In a way education is considered as an industry, which absorbs material and human resources. The education industry consists of schools, colleges, universities and various private institutions. The ‘inputs’ are teachers; buildings etc. and ‘outputs’ are students. It not only serves to diffuse the existing stock of knowledge but also acts to increase that stock of human capabilities. There are several modes of acquiring human capabilities, such as education and training.

This includes primary and secondary education. Primary or elementary is the first years of formal education generally beginning when children are four to seven years of age. Primary education aims to provide literacy and numeracy skills, and foundations in other subjects. Secondary education follows after this.

This includes students following tertiary education abroad or people purchasing online distance learning from abroad, and can be distinguished from tertiary education provided domestically.

essay on education as investment

Studies have proved that average income figures of persons who have more education are higher than the persons who have less education. Education enables people purchase it (or participate in it) to derive a future stream of benefits, whether in sense of income benefits from jobs that they may acquire by virtue of their education or whether in sense that society, by providing education, enables educated members of the labour force to add to society’s output of goods and services in the future.

A nation’s level of output is greatly influenced by its policies concerning the education of its people. Educational policy explains most of a country’s GNP per capita and high proportion of country’s economic growth rate.

Education promotes technical change in various ways ranging from the undertaking of research to adding up the existing knowledge, values, skills and attitudes of the work force.

Education leads to faster economic growth and also plays a role in reducing proverty. The relationship between economic growth and education was also addressed by Adam Smith and Alfred Marshall, two important figures for the economics profession. They pointed out that how investments in ‘education’ influences the ‘wealth of nations’.

Literacy is not education, for literacy to become education there must be adequate and proper utilization of literacy so that it can contribute to economic development. Investment in education has led to develop will of the people to gear literacy for the promotion of economic development.

In the process of economic development, the labour force is equipped with the necessary technical skills for modern industrial production with help of education. Thus education increases in the chances of gainful employment by providing requisite skills for sophisticated occupations.

After decades of high growth, the population growth rate in our country has stated declining. During the decade of 70’s the growth rate of population had reached a peak of 2 percent perannum which has declined to 1.50 percent during the period of 2006-2011 due to spread of education.

In educated societies, the families are planned, people manage their resources through savings, contributes the social and national welfare through bringing change in their attitude and by shedding orthodoxy, superstitions and narrow outlook.

Education creates awakened mind, through right knowledge, appropriate skills and desirable attitudes. It is through education that the constructive urges of man are aroused. Thus, education creates awareness for rights and duties to make an individual an enlightened citizen.

Education brings about a change in the individual, promoting greater productivity, modern attitudes, values and beliefs, about work and quality of life, thus, improving their standard of living.

Education is not only considered as an instrument for promoting individual’s self-improvement and his social relations but, education is also considered as human capital and industry as both investment as well as consumption. As consumption, it accounts for national development and as an investment education returns are compounded in from of developed personalities, thought and behavior of citizens in the society.

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Returns to Investment in Education Essay

Scholars have often used the term ‘capital’ in different contexts and fields to imply a number of related meanings that may not necessarily agree in both scope and depth. In finance, accounting and management, for instance, the term is used to make reference to financial wealth, particularly the wealth used to start or sustain a business entity. In classical economics, however, capital is used to imply one of the three factors of production, and differs from the other two factors – land and labor – because it can be used in the production of other goods, it is human-made and, lastly, it cannot be exhausted immediately in the process of production (Perlman & McCain, 2000). From this broad definition, capital can be further narrowed down to mean the goods produced or supplied by the production system that are utilized as primary inputs in the production and sustenance of other goods and services in the future. Education can be considered as a form of human capital because it is not only used to produce other goods such as knowledge, wealth, and careers, but it cannot be exhausted in the process of production once an individual goes through a school system, not mentioning that it is human-made. Skills, education and training have been used by individuals, groups, societies and states as a form of human capital that is mostly used to stimulate economic growth and reduce poverty levels. Without education as one of the primary factors of production, many organizations would not have the human capital required to drive their agenda forward. According to Investopedia (2011), return on investment (ROI) is “…a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments” (para. 1). As already mentioned, the returns on an investment in education are many, and include the knowledge and capabilities that an individual uses in the production of other goods and services within the economic system; the wealth accumulated over time and which can also be used in the production of other goods; career development; social prestige; improvement of the level, quantity and quality of human capital; economic growth; better income distribution; and reduced poverty (Economic Returns, n.d.). It is imperative to note that these returns are interrelated to the extent that one economic or social return affects the other. Accumulation of wealth, for instance, will curtail poverty levels and enhance social prestige as well as economic growth. In finance and economics, an investment is beneficial to the shareholder if it is worth the return. When an individual uses financial and time resources to get an education then end up with neither of the returns described above, it can be effectively argued that the investment in education was not worth the return. To measure the return on investment in education, therefore, one needs to subtract the cost of the investment (both in terms of time and money) from the gains attainable as a result of this investment (Investopedia, 2011). To express the results as a ratio and know the worthiness of the investment made, the total amount of returns achieved from the education investment is further divided by the total cost of the investment. You can still multiply the outcome by 100 to get a percentage. It should be always be noted that negative ratios and percentages implies that investment is not worth the return, while positive ratios and percentages mean the investment made in education is worth the returns achieved.

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Reference List

Economic returns to investment in education . (n.d.). Retrieved from < > Investopedia. (2011). Return on Investment – ROI . Retrieved from < > Perlman, M., & McCain, C.R. (2000). The pillars of economic understanding: Factors and markets. Michigan: University of Michigan Press.

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College Education as an Investment

essay on education as investment

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    From a businessperson’s perspective, education might be the best investment venture a man can commit to. In contemporary economics, investment analysis usually employs ROI (Return on Investment) to measure how efficient a financial expenditure is.

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