Understanding Return on Investment: Investing in Your Future

2. Pre-Test

3. Defining Investment • The act of putting out money in order to gain a profit

4. Two Definitions • Return on Investment (ROI) - A measurement of how worthwhile an investment is to you • Return on College Investment (ROCI) – A measurement of whether your investment of time, money, and effort into post-high school education that allows you to fulfill your personal financial goals.

5. What is return on investment? Mr. and Mrs. Johnson have a nice ranch style home. The doors and windows in their home were in very bad shape. Air was leaking through the windows and doors in the winter. They spent over $20,000 to replace all their doors and windows. Did the money that they spent make their house a more valuable house? Why? Yes – would you rather live in a house that has good windows and doors or bad windows and doors?

6. Understanding Return on Investment The Johnsons spent the money to improve their home. If the home was worth $150,000 and they spent the $20,000 for new windows and doors, and then they later sell the home for $180,000, would that be a good deal for them? Why? Yes – they sold the home for $30,000 more than it was originally worth. Some of the gain was probably due to the fact that buyers liked the idea of having new windows and doors in the home. The Johnsons invested $20,000 and had a return of $30,000. That’s a pretty good deal!

7. Applying the idea of return on investment to you How are you like a house? Is there anything that you can do to make yourself a more valuable worker? You are a part of the economy that would be called a human resource. In other words, instead of being a physical resource like a factory, a commercial building, or a highway/railroad, you are a human resource to our economy. You have and can develop skills that you can sell in our economy to make earnings and gain benefits for yourself. To make yourself a more valuable worker, you can invest in yourself (self-investment) to upgrade your skills and improve your income and benefits. This gain in income and benefits from the improvement of your skills would be a return on investment.

8. What are your options after high school? • Associate of Applied Science (Career and Technical Degree) • Bachelor Degree • Graduate or Professional Degree • Apprenticeship • Military • On the Job Training

9. Is your education an investment into your future? • 68% of Iowa jobs by 2025 will require some form of post-high school education • Average Salaries: • High school diploma: $22,000 • Associate Degree/Apprenticeship: $51,500 • Bachelor Degree: $71,530 • Graduate Degree: $78,000

10. What will you be investing? • Money • Possible tuition • Postponing some earnings for a period of time • Effort • Time

11. Comparing Returns of Investment 19.3% 16.7% 15.3% 9.1% 5.8% 2.3% 2.1% 0.6% 0.6%

12. Checking for Understanding Investment = Income – Expenses True or False? False – Devoting expenditure of money with the hope that it will produce a greater value in the future. Return on investment is the increase or decrease of the value of an asset after investment. True or False? True – When you spend money for investment, the result will be either negative or positive depending on the result. You invest money in the stock market and it grows by 5%, that 5% growth would be your return on investment.

13. Non-income ROCI Post-high school education can increase your income. Are there non-income benefits to post-high school education that results in a positive ROI? Yes! • Health Insurance • Other types of insurance: disability, dental, vision, etc. • Retirement benefits • Employability – able to get a job • Ride out the ups and downs of the economy • Personal satisfaction in doing a job you like and enjoy

14. ROCI Activity There are two major tools we will work with in giving you a chance to explore ROCI • ROCI Tool from Iowa Student Loan • Occupational Outlook Handbook from the Bureau of Labor Statistics

15. ROCI Activity • Hand out ROCI Activity Charts • Please go to: www.iowastudentloan.org • Click on College Planning Tools – Learn More • Click on Return on College Investment – Start Now

16. ROCI Activity To demonstrate how to use the ROCI Tool please follow my lead: • Click on the drop down menu and select business – this will give you various college majors in the area of business • Click on the drop down menu and select accounting

17. ROCI Activity • The page that comes up gives you some basic information on accounting and getting a job in the accounting area • If you click on the job title Accountants and Auditors, it will take you to the Occupational Outlook Handbook for additional information

18. ROCI Activity Let’s walk through the first column of the ROCI Activity Chart Career 1 – Accountant Degree required? Bachelor degree Median Salary? (click on the job title and to go to the OOH) $69,350 Job Outlook? OOH – 10% faster than average

19. ROCI Activity Now working on your own, pick out THREEcareers and use the ROCI Tool from ISL and the Occupational Outlook Handbook, and fill out the ROCI chart with information that you find.

20. Reviewing the ROCI Activity It is important that as you think about your future, you investigate what the ROCI would be for the career area you are considering. Some things to consider: How much money will you be making? Will this work for your lifestyle? Can you get a job? What is the outlook of the career you have chosen?

21. Debriefing the ROCI Activity • High school graduates can get jobs that will pay $7.25 to $11.00 per hour. • $7.25 an hour will be about $15,000 for a year • $11.00 an hour will be about $23,000 a year If a career/job you examined paid $35,000 the first year, how would you figure the percent increase in comparison to $11.00 an hour job? $35,000 - $23,000 = $12,000 Percent increase = $12,000 / $23,000 = .52 or 52% increase

22. Debriefing the ROCI Activity • Would a 52% increase in a starting salary be at least a good part of a ROCI? Yes – you would need to figure in costs of your education, but over a period of years you will significantly increase your earnings compared to a $11.00 an hour job. You would also receive that increase over a standard 40 work career plus increases in your salary as the years go by. • What other benefits will also be a ROCI for you? Benefits like: health insurance, retirement funds like a matching 401K, other insurance benefits, job satisfaction, etc. You could also have advancement opportunities to increase your earnings as you move to higher paying positions.

23. Checking for Understanding • Investment is an expenditure of money to hopefully increase the value of an asset. T F True

24. Checking for Understanding • A family has a new high efficiency furnace installed in their home. In five years the savings in fuel, pays for the cost of the furnace. Was this a good return on investment? Definitely!!! The family saved enough money in fuel costs that the furnace “paid for itself”. That is a great return on investment.

25. Checking for Understanding • What would be some reasons you should consider post-high school education? • 68% of Iowa jobs in 2025 will require post-high school education • Increasing your earning power • Increasing your employability • Getting important benefits like health insurance, disability, etc. • Providing for your retirement • Enjoying what you do or are interested in

26. Checking for Understanding • Post-high school education means only college (bachelor degree). T F False – it also means: Associate of Applied Science (Career and Technical Programs) Graduate or Professional Degree Apprenticeships Military On-the-Job training

27. Checking for Understanding • What are two tools you can use to research about the Return on College Investment for college programs and careers? ROCI Tool through Iowa Student Loan www.iowastudentloan.org Occupational Outlook Handbook www.bls.gov/ooh

28. Post Test

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