Educational Inequity

Educational Inequity: Why Businesses Should Care About Their Community’s Education

    A big problem that I have noticed while working in a warehouse setting, is the lack of basic skills needed to be a productive employee. Some of the warehouse associates (general labor) are lacking in problem solving, computer, mechanical, and in some cases even language skills (this may be due to English being their second language). So where does this problem come from and how can we solve it? I’m about to offer a solution that would kick-start an end to educational inequity.

    As you can imagine, one of the biggest problems companies face is finding talented employees. That applies to all companies, from giants like General Electric to your local corner store. But the difference is that General Electric, because of their sheer size, has more freedom in who they can employ and where they choose to be located. Those corner stores and small businesses don't have

Great Lakes Science Cennter & MC2 Campus

the same luxury. They have to find their employees from their surroundings because it would be too costly to relocate. Now what if their surroundings are filled with with high school dropouts? In effect, they will be forced to hire lower-skilled employees because they can't afford the expensive personnel searches that larger corporations can. The staffing of lower-skilled employees will likely inhibit their growth. This low skilled labor environments also means that large corporations are not as likely to move their operations to those communities. They would be unable to obtain enough skilled laborers willing to make the commute. This combination could create a "dead zone" where there is little economic growth either from inside or outside i.e. small local businesses growing or large corporations coming in.

     So what does this mean to those local businesses? In short it means they should take interest in the education that is occurring in the communities they will be hiring from. Local businesses and school districts need to be involved in a two way dialogue that starts with the question "What can I do for you?" They need collaboration.

    Two schools come to mind for me when I think about this type of collaboration: Robert A. Taft Information Technology High School & MC2 STEM High School. Those schools  have partnered with

Robert A. Taft IT High School

Cincinnati Bell and General Electric, respectively. While GE's partnership is quite a bit more extensive than Cincinnati Bell's (part of the MC2 STEM H.S. is inside of GE's campus) they are quite similar in many ways. Both companies are providing their high schools with invaluable resources like dedicated tutoring & mentoring program and internships that could offer the students a direct path into a full-time job, In GE's case there are even content  instructors for MC2's project-based learning.

    These partnerships are just a small part of the greater solution to educational inequity that needs to being corrected in all of our communities. Consider that after MC2 enacted their partnership with GE, the graduation rate has almost tripled from 31.1% in 2003 to 91.4% in 2010. Partnerships create opportunities for educational growth that otherwise would not be available to underprivileged  students. So if you run a local business in your community or know somebody that does, it can't hurt to start the conversation. Who knows, it might help your city grow.

Five Basic Financial Tips

The Top Five: 

A Few Basics For Everyone

     In order of importance here are the things you need to focus on to insure you can secure your own future: 

1. Get an education 
2. Pay off your debt quickly
3. Get insurance 
4. Save for emergencies
5. Invest your money as soon as possible

     

     Getting an education is one of the single most important things anyone can do in their life to secure their future. It is as easy as looking at this graph I found in the "College Pays 2013" 

When you acheive a higher education you are more likely to earn more money. The median income of a person with a Bachelor's Degree is more than 60% over that of a person that only received a high school diploma. This graph doesn't show you that you are also more likely to have health insurance, pension plans, lead healthier active lifestyles, and yes are more likely to have a job. 

     But college costs way too much, can't I just get a decent job right out of high school and earn money while college kids are studying? Yes you could but as the study says the average college graduate will earn enough by age 36 to compensate for the four years they were out of the workforce and the expenses of tuition & fees. To top it off the gap between high school diploma and bachelor's degree earners widens with age giving more of a long term incentive to obtain a higher education. 

     Paying off your debt comes in at a close second in the realm of intelligent financial decisions. First, avoid debt at all costs! I can't stress this enough because debt comes with interest and that means you are actually paying more for the money you borrowed. For example, you buy a house worth $200,000 at a 3.7% interest rate with a 30  year term. If you pay off your house in that 30 year period and pay your exact amount monthly of $920.57 you will have paid $331,405.20 for that original $200,000. I am not saying you shouldn't take out mortgages, credit cards, or student loans. What I am saying is you should pay for the things you want in cash if you can, if not then Pay off your debt as quickly as possible!
     This brings me into the second part of this debt portion. Focus all of your financial ability on paying off your loan as soon as possible without neglecting other necessary things. The sooner you pay off loans the less money you are losing. Take a look at that loan again from the last paragraph, same principal (original money borrowed),  same interest rate, same term, same minimum payments. But you decide to pay more than the minimum by $300, which is called pre-paying a loan. If for the rest of the life of the loan you pay $1,220.57 you will save $52,425.12 and pay the loan off almost 11 years early. While this is a bit of an extreme case it applies to all types of debt and in special cases like credit cards you can get away with 0% if you pay off your monthly balance.

     The worst part of insurance is that it is usually quite expensive and you don't get much out of it, a part from housing and loans it will probably be your third largest expense overall (vehicle, property, health, etc.). One common example is insuring a vehicle. In 2015 it cost on average $1,403 to insure one of the most popular vehicles, the F-150. That coverage gave you $100,000 single injury, $300,000 multiple injury, and $50,000 property damage.But some may decide insurance is too expensive and you would rather save the money. If you don't get pulled over or get in any accidents you will save money. If you get pulled over you face a list of legal actions possibly including losing your licence (could lead to losing your job), registration, traffic tickets, and other fines. If you get in an accident you may possibly become liable for injuries and property damage that occurred in the accident. Check out these statistics from Rocky Mountain Insurance Information Association:

"In 2013, the average auto liability claim for property damage was $3,231; the average auto liability claim for bodily injury was $15,443. In 2013, the average collision claim was $3,144; the average comprehensive claim was $1,621"

     While the average amount of coverage people buy may seem outrageous it isn't when you realize what might happen in a serious accident that was caused by you. If you cause a crash in which a vehicle was totaled, say that vehicle was a 2015 Ford F-150 it would cost you almost $35,000 if you weren't insured to buy them a new vehicle. If that person was seriously injured say a fracture in their lower body you would be liable from almost $6,000 (single) to almost $40,000 (multiple fractures). If you don't have cash to cover that they will come after your assets like cars, house, or any valuables.
     This information is just for one car in one accident! What if you are the sole cause for multiple cars being totaled? That would equal your finances being totaled, that is if you were uninsured. Bottom line, get insured, and not just automotive, purchase health, dental, vision, property, etc. as well.

     You can usually buy insurance for just about anything, but sometimes it just isn't cost effective to do so. That is why you save for emergencies. Think of it as paying yourself for an insurance policy. These emergencies include things like home repairs not caused by natural disasters (average of 1-4% of homes value per year), vehicle repairs not caused by accidents (average of almost $400), and the loss of a job to cover monthly expenses while job searching. The average emergency savings you should have on hand at one time is 3-6 months of your current monthly income.

Average Vehicle Repair Cost

     The last thing I would like to talk about is investing your money. This is a pretty scary decision for most since there is risk involved in it, the risk of losing your money that you invested. This is especially so for young people that have entered the work force and don't understand the concept of saving for retirement. For those that don't really understand it simply look at the following example. This graph will

show how much money can be amassed  if you start contributing the maximum of $5,500 (about $458 montly) to an individual retirement account at the age of 22 and didn't take it out until the age of 65.

I would like to point out that the average mutual fund will return about 8-12% annually. This will give you according to the graph anywhere from $1.8 million to well over $3.2 million. This however is very dependent on the stock market and the risk you are willing to accept in your investment portfolio.
     The next question would be, will that money last me through my retirement? This is very dependent upon your lifestyle, however either of those numbers should be more than enough to live comfortably baring financial disaster. Here is why, when you finally hit your retirement your investment portfolio will be converted into something that is much more risk averse and easily liquidated for income purposes. These types of portfolios only give returns of about 3-5%. While this return rate is low it serves the purpose of not having to withdraw any money from the principal (money you started with at retirement) and living off of the interest you will receive. To get a better picture of how your $1.8-$+3.2 million will serve you in retirement take a look at this next graph. Note that this graph is based off of retiring with 30 years left to live in life at an annual rate of return of 3%. The bottom axis will tell you what your monthly income would be based off of the the amount of money you have saved at retirement.

     Right off the bat you might notice that our minimum return ($1.8 million) that we had figured would bring us a monthly income of $8000 ($96000 annual) in retirement. Our top range of $3.2 million which isn't even on our retirement graph would last us 32 years at a monthly income of $13000 ($156000 annual). While these incomes are all fine and dandy I would not recommend drawing the maximum that you can while being able to live 30 years on the money. This will give you a buffer for financial disasters and if all goes well give your children a nice inheritance.

     It all starts with an education, paying off that education as quickly as possible, purchasing insurance for the things you buy in life, saving for the uninsured things, and investing in your retirement. Balancing the top five is difficult at times and they are not the only things in life that will matter financially, however if you follow them to the best of your abilities you should end up in a secure position once you would like to retire.