How Net Worth Varies by Education Level and Why College Graduates Hold More Wealth

Key Takeaways

• Households headed by a college graduate have a median net worth that’s four times higher than those with only a high school diploma.

• College grads are more likely to own assets like real estate and retirement accounts that have historically multiplied wealth over time.

• Homes owned by college graduates are worth more than double those owned by high school graduates.

Is college worth the cost and sacrifice? Data from the Federal Reserve suggests it is.

The central bank’s most recent survey of household finances shows a striking relationship between education and wealth, revealing wide differences in net worth and asset ownership across education levels.

Net Worth Climbs With Each Step Up the Education Ladder

The Federal Reserve’s Survey of Consumer Finances reveals a clear staircase pattern across the four education tiers it tracks.

Households headed by someone without a high school diploma had a median net worth of just $38,050 in 2022. High school graduates, meanwhile, had $107,000, while those who attended some college but didn’t earn a bachelor’s degree reached $137,040.

Then comes the biggest jump. Households headed by a college graduate had a median net worth of $464,400—more than four times the median for high school graduates.

The gap is even wider when measured using mean or average figures. The net worth of college-educated households averaged almost $2 million in 2022, compared with around $413,300 for high school graduates. But averages can be skewed by a relatively small number of very wealthy households, which is why median net worth is generally considered a better measure of a typical household’s finances.

Why This Matters

A college degree doesn’t guarantee financial success, and the assets driving these wealth gaps—homes and stock market investments—are available to anyone. But Federal Reserve data shows college graduates are far more likely to own those assets and have larger balances in them.

What College Graduates Own That Other Americans Often Don’t

The education wealth gap isn’t just about earning a larger salary. The real driver is what households do with that extra money. The higher the education level, the more likely a household is to own wealth-building assets that tend to appreciate over time.

Real estate is one of the most valuable assets many Americans own, and college graduates are substantially more likely to be homeowners. Nearly three-quarters owned their primary residence in 2022, compared with 62% of households headed by a high school graduate.

The education gap is even more pronounced when it comes to investing. About 75% of college-educated households held retirement accounts, compared with fewer than 40% of high school graduates. College graduates were also three times as likely as those with just a high school diploma to own stocks outside retirement accounts, giving them additional opportunities to build wealth as markets rise.

Inside the Typical College Grad’s Balance Sheet

Homeownership rates tell only part of the story. The education divide is also reflected in the value of the assets households own. College graduates tend to hold more valuable real estate and have substantially larger balances in retirement accounts and other investments.

As you can see, the typical college-educated household owned a significantly more valuable primary residence. In 2022, the median home value was $450,000 for college graduates, which is double the value of $225,000 for households headed by a high school graduate.

The disparity is also substantial for investments. The typical college-educated household held $141,700 in retirement accounts and $25,000 in stocks outside retirement accounts. That combined total of about $167,000 is three and a half times the $48,000 held by high school graduates.

Those gaps can become even more pronounced over time through compounding. Based on the S&P 500’s historical average annual return of 10.5%, a portfolio worth $166,700 would grow to roughly $452,000 after 10 years without additional contributions. A portfolio starting at $48,000, in contrast, would reach only about $130,000 over the same period.

Read the original article on Investopedia