WE live in the K- or Knowledge-Economy, where what we know and, frankly, how we communicate it determines whether we stagnate, rise or fall through the seven socio-economic strata of our respective home countries (which is Malaysia for me and most of my readers):
1. Upper-upper class;
2. Lower-upper class;
3. Upper-middle class;
4. Middle-middle class;
5. Lower-middle class;
6. Upper-lower class; and
7. Lower-lower class.
We would all prefer to move UP in life, not DOWN (So, visit me here to read more on my thoughts about northbound migrations through those strata or levels: www.nst.com.my/lifestyle/sunday-vibes/2022/07/816006/money-thoughts-econ... )
The key takeaway we should extract from thinking about intra and inter strata migration is that in this day and age, it is possible to move both upward (ideally) or downward based on our own efforts.
That 21st century reality, which most of us take for granted, was not always available. Those of us who live in countries where this is possible should be thankful. And those who don't, should consider moving on to greener pastures.
IMPORTANCE OF EDUCATION
For most of us who live in countries where upward socio-economic movement is possible, it is imperative to recognise that when it comes to improving our lot in life, education is our key to a better future.
Multiple studies have shown that the more time people spend in school — be it primary, secondary or tertiary — progressing through their formal education, the more money they make over a lifetime of employment — on average.
The better educated we are, the larger our hopefully — more or less — consistent increases in annual income.
If each of our pay raises is NOT met with an identical increase in expenses but a consistently smaller one, then our surplus cash flow position improves over time.
This means there will be greater disposable income that can be saved and invested year in and year out. The snowballing effect of compound interest (or more accurately compounding yields from, say reinvested dividends, distributions or collected rental streams) can generate large wealth increases for financially well-managed families from one decade to the next — barring, of course, catastrophes like bankruptcy, illness, lay-offs and premature death.
Also, apart from formal education that is built upon book smarts, informal education that boosts street smarts can also help entrepreneurs build profit-generating compounding engines — aka viable businesses.
A great way to continue building up our functional reserve of usable "smarts" is to not merely rely upon our own but to also tap into both the book smarts and street smarts of professionals, who are able to help us move forward in life.
TWO TYPES OF SMARTS
All successful people consciously or unconsciously established a satellite system of specialists, such as bankers, lawyers, accountants, subject matter experts and, increasingly, licensed financial planners. These professionals add to the body of knowledge available to life's winners to move even further up.
It is glaringly obvious that both types of "smarts" — book-based and street-based — are necessary.
Note: Often the biggest economic winners in Stratum 1: Upper-upper class, which includes but is not restricted to Earth's roughly 2,600 US dollar-denominated billionaires, have that rare combination of book smarts and street smarts.
So always fixate on the importance of both formal and informal education. The younger we are, the more important the former is, and the older we get, the more essential the latter becomes. We need to love learning and thus continue doing so throughout our lives.
Bottomline: Education, in tandem with diligent exertion and network expansion, is the best path for most of us to move out of relative poverty, to relative prosperity through steady economic uplift.
In the realm of book smarts, formal education during our tertiary years is useful. But not everyone has such opportunities. So, it is heartening that what can yield even greater long-term economic-plus-social-plus-career benefits is continual self-directed learning.
The famous British historian and philosopher Arnold Toynbee, who died in 1975, was also a research professor of international history at the London School of Economics and at (my alma mater) King's College London. Toynbee once wrote:
"Lifelong part-time education is the surest way of raising the intellectual and moral level of the masses."
EDUCATIONAL ENHANCEMENT
Toynbee respected his contemporary Bertrand Russell — a fellow philosopher and a world-class mathematician and logician. Russell wrote in his Sceptical Essays (published in 1928):
"Education should have two objects: first, to give definite knowledge, reading and writing, language and mathematics, and so on; secondly, to create those mental habits which will enable people to acquire knowledge and form sound judgments for themselves."
In our economic world marked by geopolitical stress, climate change and rapid capital market flows across borders, we need to stay sharp, current and relevant to harvest the immense bounty that is swirling all around us, but which generally flows in greatest measure to the best informed amongst us.
And being better informed about the subjects that matter most boils down to committing to lifelong learning.
None of us wants to face obsolescence leading to economic degradation or, worse yet, economic extinction. The "vaccine" against that sad yet too common state is ongoing educational enhancement.
© 2024 Rajen Devadason
Rajen Devadason, CFP, is a securities commission-licensed Financial Planner, professional speaker and author. Read his free articles at www.FreeCoolArticles.com; he may be connected with on LinkedIn at www.linkedin.com/in/rajendevadason, or via [email protected]. You may also follow him on Twitter @Rajen Devadason and on YouTube (Rajen Devadason).
