New Here? Get the Free Newsletter

Oblivious Investor offers a free newsletter providing tips on low-maintenance investing, tax planning, and retirement planning. Join over 11,000 email subscribers:

Articles are published Monday and Friday. You can unsubscribe at any time.

Is Private Education a Good Investment?

This is a guest post from Michael, a contributing editor of Dough Roller, a personal finance and investing blog, and Credit Card Offers IQ, a credit card review site.

The debate between private and public education will most likely go on forever. Whether your child comes out of private or public school better prepared for the rest of his/her life will never really be known. In order to find out, you would need to have the same child experience both, which simply isn’t possible.

Public schools provide statistics on how the diversity and larger class sizes teach students to be patient with (and tolerant of) others. Private schools show that smaller class sizes allow teachers to be more interactive with students, that they have better-kept facilities, and that they can fit more material into a school day when they follow their own curriculum rather than the state’s.

I don’t doubt that both schools have their advantages, but is paying for a private school education truly worth the money?

According to a census taken at the end of the school year in 2009, the average private education tuition was $17,441 per year. If you decide to send your child to private school for grades 1-12, you will be spending a total of $209,292 on your child’s pre-college education. If you choose to send them to public school, you spend nada.  Is spending over $200,000 a wise investment for your family and–more importantly–for the child you are spending it on?

My answer is “no, not even close.”

Granted, there are going to be situations where the public schools located in your area are poor or downright unsafe and sending your child to a private school is an excellent decision. But for many parents, I can think of better ways to invest in your family’s future.

If you invested $17,441 a year into a high yield savings account paying 2%, when your child graduates from high school, you will have a total of $240,000 available to pay for college, cars, or anything else you think would help your children out. And if you have a financial advisor you trust, you can probably do much better than that.

Why do I feel this way? It comes down to return on investment.

  • Does the $200K ensure that your son or daughter will be better educated? No.
  • Does the $200K ensure that your son or daughter will be approved for a top end University? No.

Statistics show that a proportionate number of private and public school students are accepted into quality universities and that private students standardized test scores are only slightly higher than that of public schools. I would argue that private schools show better standardized test scores on average because the living conditions for privately schooled children are better than those of publicly schooled children.

So if there is no guarantee of a better education–or a better shot at college–then what do you get out of your purchase?

  • More Control – Parents have little control over a school board’s curriculum in a public school because it comes from the local or state government. Private schools are funded by parents and not by taxes, so parents have a little more control in what they can change (or try to change)
  • Better Facilities – There’s no doubt that a private school will have better-kept facilities, more resources and offer more opportunities for students to expand their minds. Whether or not students are receptive to these options is dependent on the student of course.
  • Peace of Mind – Just as my mother doesn’t mind spending $90 each year to have her taxes done by a professional, rather than doing them herself, private educations can put a parent’s worries at ease, because they are better maintained and overall safer than public schools.

From personal experience, I can tell you that my public school education taught me a lot about life that I most certainly would not have learned had I been enrolled in private school. Students that work hard and take education seriously can do so in either setting, and who’s to say that private school will actually be the better option?

Whatever decision you choose, make sure you are doing it for the right reasons and everything will work out A-OK.

New to Investing? See My Related Book:

Book6FrontCoverTiltedBlue

Investing Made Simple: Investing in Index Funds Explained in 100 Pages or Less

Topics Covered in the Book:
  • Asset Allocation: Why it's so important, and how to determine your own,
  • How to to pick winning mutual funds,
  • Roth IRA vs. traditional IRA vs. 401(k),
  • Click here to see the full list.

A Testimonial:

"A wonderful book that tells its readers, with simple logical explanations, our Boglehead Philosophy for successful investing." - Taylor Larimore, author of The Bogleheads' Guide to Investing

Comments

  1. It isn’t always about the money. And that is probably the biggest point. Of course the private school my kids go to also costs far less than $17K a yr. If it was that high, we would homeschool. :O)

    In our area, public schools do not support our beliefs. They also focus too much time on things that have nothing to do with education.

    Of course, whether your kid goes to private or public, I would say parental involvement is the biggest key.

    I actually have kids in public, private, and charter. No, one size does not fit all. But I will tell you, the influences we’ve had to deal with from the public are by far much harder to deal with than the private or charter.

  2. I believe the data on test scores to accurately reflect society as a whole. This is especially true when considering the law of averages and the law of large numbers.

    The only reason private scores are slightly higher is due to parental involvement. This is the key factor in a child performing above average. With the exception of a genious child of course.

  3. I have to respectfully disagree with Michael. I’m a product of both public and private schools and I can say that the difference between a decent public school and a decent private school can often be substantial. This is in part due to the fact that private schools tend to be better staffed and better run and in part because a good number of the students and parents care, leading to an environment more conducive to learning.

    Of course, these are generalizations and none of this is black and white. There is no need to spend $200k on a private school – price depends on the city and the school, they vary greatly. The fact that a school is private also does not ensure that it is better than its public counterpart. Finally, there is usually no need to put your child 12 years of private schooling. In many cases, high school is where the difference will be made.

    Although I agree that students who work hard will succeed in either setting, I don’t agree that students in private schools are missing out on experiences they would get in public schools. I’ve done both and know this not to be true.

    JF

  4. Michael,

    I think if you are only looking at monetary factors I think the public schools win, however there are a lot of other factors to consider.

    ChrisCD brought up great point- beliefs are a big issue. Don’t forget a lot of private schools are run by religions. What value would you place on your child learning morals consistent with their religion?

    The average cost of $17K/yr seems really high, I suspect it is skewed by some ultra high cost schools and the median would be a better measure.

    Do most students really go to a private school from K-12? I suspect it is much more common to do some mix of private and public education- for example a private school when they are more impressionable then a public school for middle or high school.

    -Rick Francis

  5. A lot of the time people don’t really choose schools for their children, they choose it according to how they want to be seen by their peer group.

    I know I will be told here that parents want only the best for their kids and so forth, and I don’t doubt it’s true, but at least in the UK private vs public schooling stratifies around very clear social/class lines.

  6. Enjoying the conversation here. :)

    As to me personally, being from St Louis–the Land of Catholic Schools–I went to private school for grades 1-12, so I have no basis for comparison.

    I’m also intrigued by the $17k figure. I know my high school cost $6k per year and grade school was less than that.

  7. Quality of education is not my primary concern when evaluating a school. Much more important is the peer group to which my child will be exposed. My own experiences across both public and private schools during my K-12 years has been that some private schools offer a significantly superior peer group with regard to attitude, moral standards, behavior and safety.

    While I am college-educated and have a white-collar job, I don’t care if my son is a mechanic that never even finishes high school. I care that he be capable of planning and living a happy life and that he harms no one else in that pursuit of happiness. My involvement and his peer group will have a much bigger impact on that goal than will the quality or cost (in either direction) of his education.

  8. Parochial schools are on the low end of cost per year, with the average cost around $6,500 but some of the top schools (5%-10%) charge up to $38,000 a year, which throws off the averages a bit.

    The discussion here is great and all of the points are valid but I think the very fact that the debate is somewhat even would suggest the actual investment to be a poor one. Each situation will undoubtedly be different and depending on your location you may feel private school is your only option but overall, I don’t feel the return is there.

  9. I agree that the financial return is not there. But, I also think that’s an odd way to look at it. Retirement doesn’t have a financial return, nor does having children, nor does traveling, donating to charity or having a hobby. But they do have completely different sets of merits that lead many people to pursue them. Like most of those things, private education stands up very well on its own as a worthwhile expenditure rather than a financial investment. Considered financially, it is an end rather than a means to an end. You earn money so that you can afford to pay for a private education; you don’t pay for a private education so that you can earn more money. At least, that is the way I’ve always considered it.

  10. Michael -
    Do you have any sources for the idea that private schools have better facilities? I went from a public primary / secondary education in a well-to-do area to a top 25 private university and was surprised to find that some of the facilities were worse at the private university. Not having the state (in the sense of l’etat) fund it, the private university was reliant on tuitions and private donations, so it had a multimillion dollar endowment for flowers, but a substandard gym, no big stage for performances and no clocks in most classrooms. I don’t know if this is representative, but I can imagine a certain economic might provided by the state (perhaps in the way of mostly guaranteed funds), while tuition and private donations can be less consistent. For example, the top French colleges/universities tend to be run by the state, while the private schools tend to be underfunded (except for in business). Then again, this may only apply to the top few percent of schools, particularly in areas that fund their schools well.

  11. I went to public school and feel that this was the best thing for me. I learned a lot and experienced many different things (not intended to mean anything disgusting) in a public school system.

    I went to probably one of the worst schools in a terrible school system, but I experienced a lot and feel that I am a very successful person.

    I don’t think that a private education would have benefitted me, and it definitely would not have been worth the money for my parents to send me to a private school.

    Having said that, the debate is still going on as to where my newborn daughter will go to school…

  12. I agree with Ethan. Also, a private school can integrate religious and secular learning, and for some families this is really important.

  13. Jamel Rose says:

    For me, going to public or private school is not a big deal. The most important thing is the education and not the name of the school or what.

  14. In my opinion a large part of education is what the individual puts into it. Of course there can be differences in education by being placed in a better school system but if the person has no desire to invest the time in bettering themselves it is doubtful the school will make a difference.

Disclaimer: By using this site, you explicitly agree to its Terms of Use and agree not to hold Simple Subjects, LLC or any of its members liable in any way for damages arising from decisions you make based on the information made available on this site. I am not a financial or investment advisor, and the information on this site is for informational and entertainment purposes only and does not constitute financial advice.

Copyright 2014 Simple Subjects, LLC - All rights reserved. To be clear: This means that, aside from small quotations, the material on this site may not be republished elsewhere without my express permission. Terms of Use and Privacy Policy