By Lewis J. Walker
NEW YORK (AdviceIQ) -- The shrinking middle class, the tilting of more wealth toward upper-income people, rising inequality -- all are political flashpoints. But no matter how much you try to address this by tinkering with the tax code or using some other means, no other remedy is better than increased education.
Much political noise reverberates relative to the "wealth gap." Economist Paul Krugman, in his Jan. 23 New York Times column, decried an "arbitrary and inequitable distribution of wealth and incomes" in American society. President Barack Obama posits inequality as a target for government activism. No matter how you address income disparities, education is the clear answer to fix economic woes.
The primacy of education's role in bettering people's lot has a long history. Among the first to advocate for mass education was John Knox (1514-72), a Scottish clergyman and reformer and the founder of the Presbyterian denomination. In his day, only the rich were educated. Most of Scotland's population was poor and illiterate. Ignorance bred superstition and immoral behavior, he thundered.
Believing that everyone should be able to read the Bible, in 1560 he detailed a plan for "the vertue and godlie upbringing of the youth of the Realm." He saw education of rich and poor alike as a responsibility shared by the family, the school "and the Kirk," meaning the church. That same year, the Scottish Parliament made education a national priority.
The Wall Street Journal last year reviewed a report from the National Marriage Project, The New Unmarried Moms. There is a clear link, it said, between unmarried childbearing and educational achievement, which in turn affects social mobility and lifetime earning power.
We live in a knowledge economy. Education enhances job, career and earning prospects. How do birth and marriage statistics enter into the equation? The Journal article indicated that, among college graduates, only 12% of first births are outside of marriage. For those who did not finish high school, the poorest segment of our population, 83% of first births are outside of marriage.
A number of those unmarried mothers go on to have additional children with different fathers. The children, caught in a "maze of step parents, siblings, grandparents, and homes," are more likely to battle emotional, social and academic challenges. The result is often poor grades, behavioral problems, drug abuse and perpetuation of a cycle of out-of-wedlock births and dependency on welfare programs.
As in any situation, there can be hope. My grandparents raised me until age 10, and they taught me to read at a young age even before I entered public school in Flushing, N.Y. Education was emphasized at an early age.
As an adviser I have helped young unmarried women make financial decisions, including getting a will and sufficient term life insurance to fund education and care of the child by guardians in case of the mother's death.
New parents should have wills that specify who would raise children in the event of a disaster that makes them orphans. Given the costs of raising and educating a child, $1 million or more in face amount in low-cost term life insurance is reasonable. Include well-thought-out trust provisions about when the children get the money and for what.
Beyond worst-case preparations, education planning is critical to a child's future success. One study projects future private four-year college costs at $409,913 for a newborn; $305,884 for a 6-year-old. Don't wait until a child is 10 before you start funding 529 college savings plans, allowing you to put away money for education on a tax-favored basis. The time value of money counts.
The Autism Society of America pegs autism as the fastest-growing developmental disability; one of every 88 births result in autistic children. Parents of children with physical and learning disabilities face added costs for health care as well as education. Challenges with public schools have these parents opting for private educations at some point from pre-school through grade 12. Because education ranks as one of a family's greatest costs, this means fewer choices; almost half of families cut spending to afford college, recognizing a strain on their retirement saving budgets.
Young people must recognize that in a knowledge-centric world with growing competition for good jobs, education and personal development counts. If not college, certainly vocational training. Someone has to know how to fix things, whether hair, high tech equipment, cars or your heating system when it blows up on a cold holiday day.
John Knox was the father of the Protestant work ethic, which motivated my grandfather -- education, hard work and thrift. Not a bad formula for today. I owe Clyde Rea, my Scottish heritage grandfather, a debt of gratitude.
-- By Lewis J. Walker, CFP, president of Walker Capital Management and Walker Capital Advisory Services in Norcross, Ga., a registered investment adviser in securities and certain advisory services offered through the Strategic Financial Alliance. Walker is a registered representative of SFA, which is otherwise unaffiliated with Walker Capital. 770-441-2603. firstname.lastname@example.org .
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