Recent data from the Federal Reserve illustrates the considerable gap between wealth and education, showcasing that education directly correlates with an individual’s wealth. The four educational levels tracked by the Federal Reserve reflect a well-defined upward trend in net worth.
In 2022, households headed by someone without a high school diploma had a median net worth of just $38,050. This figure increased to $107,000 for high school graduates, $137,040 for individuals who attended some college without earning a bachelor's degree, and an impressive $464,400 for college graduates.
When considering average net worth, college-educated households averaged nearly $2 million, in comparison to $413,300 for high school graduates. Also worth noting is that college graduates tend to own more homes and stock market investments, assets that significantly contribute to these wealth gaps.
While higher education doesn't guarantee financial success, it often leads to better asset ownership and larger balances. Real estate ownership, for example, is common among college graduates, with about 75% owning their primary residence.
Investments also represent a massive educational divide. About 75% of college-educated households had retirement accounts, an asset held by less than 40% of high school graduates. College graduates were also thrice as likely to own stocks outside of retirement accounts.
These socioeconomic discrepancies also extend to the values of the owned assets. College graduates generally boast more valuable real estate, larger retirement account balances, and more investments. For instance, in 2022, the median home value for college graduates was $450,000, double the $225,000 for high school graduates-led households.
Alongside this, typical college-educated households had noticeably more assets in retirement accounts and stocks outside retirement accounts - approximately $167,000. This figure was nearly three and a half times the sum owned by high school graduates, only $48,000.
Compounding effects can further amplify these wealth gaps over time. A portfolio worth $166,700 can grow to approximately $452,000 in 10 years, given the S&P 500's average annual return rate of 10.5%. In contrast, a $48,000 portfolio would only grow to about $130,000 over the same timeframe, demonstrating the considerable financial advantage of a college education.