Monday, 25 February 2013

First steps to wealth: How our early decisions still colour our future earning opportunities


As unemployment rises and cost of living increases, entering the workforce continues to be fraught with challenges. A new study by leading UK investment company Skandia shows that the choices we make at an early age still have a profound effect on our future earning potential – doubtless providing considerable food for thought for school leavers pondering their next steps.

The study breaks down the five most common basic opportunities for young people in the UK.
  • Entry level job (leave school at 16-18)
  • Full-time study
  • Work and part-time study
  • Subsidised training or apprenticeship
  • Unemployment

The study then takes into account the average salary a young person can expect on entering the workforce after taking each of these options, and calculates what they can expect to earn over a lifetime – adjusting for salary increases as the subject ages and gains more experience.

A degree is still the most common route to higher earning potential, with graduates likely to earn on average 50% more than people who leave school at 18 and more than twice as much as people who start work at sixteen. However, school leavers who can secure a good apprenticeship can earn almost as much as a graduate over a lifetime.

The study also looks at the implications of taking on student debt in order to fund a degree. The spectrum range of student debt at graduation post-2012/13 enrolment is £33,975 up to £48,750.
Despite this being a personal debt, unless a student starts earning £50,000 per year immediately upon graduation, it’s likely that a significant amount of this debt will be written off by the Government.

In 30 years’ time the UK Government is likely to have to write-off debt of between £30,649 and £64,935 for every full-time university student who graduates in 2015, which is likely to have serious financial repercussions.

The First Steps to Wealth guide was commissioned by Skandia and produced by CoreData Research UK, who used primary and secondary data to drive a series of analyses charged with assessing the choices available to young Britons in 2013 and beyond. Ultimately, it shows that while the degree is still a strong route for many young people, it is not without problems and also not realistic for all, meaning that alternatives still need to be considered. The earning potential associated with apprenticeships and subsidised training should be of particular interest to school leavers who feel that University is not the right choice for them.  

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