Graduating High School Early: The Real Secret To Building Wealth

My 16 year old son just graduated high school over 2 years early. This is a major milestone and a great opportunity for him to build a very strong base before going out into the world on his own.  Here is how (and why) he graduated from high school 2 years and 6 months early.

Why Graduating High School Early Is Important:

The K-12 system ensures that schooling is the primary activity for children from age 5 to 18, often 19, especially for boys. It is very common for school systems to push parents to enroll their boys in a young 5s or Pre-K program so that they will be older and thus bigger in high school for sports. K-12 schooling then takes up 7 hours a day, 180 days a year for a total of 16,380 hours not including commute time, homework, or extra-curriculars.

In our culture it is relatively rare for high school students to work. The typical high school student leaves graduation with no work experience, no money, and no transportation.  This is not good.  Part of this is social norms and part of it is child labor laws, which make it an administrative nightmare for employers to hire students. Only 20% of students in high school have a job at all, down from a 40 year high of 31% in 1998. Of those who do work, the vast majority spend the money they earn on wants, rather than building wealth.  The median net worth for people 18-35 is just $13,900, and this will of course heavily skew upwards for age. The vast majority of late teen and 20 something adults are dead broke.  This then leads to higher level societal problems.  Lack of resources and ability to believe in future resources is a large part of why birth rates and marriage rates are falling. It’s a large part of why addiction and suicide rates are rising, especially amongst young men.  It is imperative that we change the way we raise our children so that they are economically viable and have hope for the future.

The absolute best time for people to invest money is prior to moving out of their parents home.  This is when they have no expenses and have the most time for compounding interest to work its magic. They are also not earning a lot, so they will be in very low tax brackets, making investing in ROTH accounts that will never be taxed even more advantageous.  While it is a burden for some parents to have their children live with them past high school graduation for a year or 2, it certainly should not be a burden for them to provide that cover at least until age 18 that they were going to provide anyways and using the time bought by graduating from high school early to get started on building some serious wealth. Also letting your kids who do graduate from high school on the normal schedule stay at home for a couple years is a far lower burden than watching them struggle for the next 20 years.

I recently wrote that our children need $85,000 before leaving our homes, and I stand by that number.  This is of course much easier to achieve if they graduate from government indoctrination camp, I mean high school early.

The Lead Up To Graduating High School Early:

During Covid all four of our kids were instantly thrown into e-learning.  For the most part this was complete chaos. We had to upgrade our internet since we had to have 4 simultaneous streams going on at once.  We started with all four kids in cubbys at the kitchen table, which did not last well for long due to noise issues and territorial squabbles.  We ended up having the older kids go to their bed rooms and the younger kids take over the table.  All of our kids had different results with eLearning.

Our 16 year old did the best with eLearning.  He is more introverted than the rest of the kids and in general school was easy for him.  He got to a point during Covid where in addition to doing the assigned work he needed to do, he also was reading several books a month during school hours.  He came to the realization that most of schooling is a general waste of time since he could accomplish the assigned work in a fraction of the school day. Following Covid he returned to school, but bored easily.  He did 7th grade through our normal school, but at this point had decided that he would like to pursue any option that allowed for early graduation.  Our school had a program where he could earn his HS diploma and an associate degree at the same time by doing 5 years of school.  This really didn’t provide the desired outcome.

He did 8th grade through a state of Michigan home school program during the 22/23 school year.  This program didn’t allow for early graduation, however directly after this year we could enter the Penn Foster High School program that does allow kids to work at their own pace. In addition to not being challenged at school another reason I wanted him to graduate early was because he did Young 5s, which put him on the older side of his grade.  He would be graduating roughly 3 months before turning 19.

How To Graduate High School Early With Penn Foster:

For the Penn Foster High School program there is a 1 time payment of $1,100 to cover the cost of the entire program.  The one time payment offers a large discount over paying monthly.  They also accept monthly payments of $55 a month with a total cost of $1,569. Students can work at their own pace with the average student graduating in 14 months.  They advertise that fast track students can finish in 6 months.  My understanding is that students can complete up to 15 tests in a week, which would make it theoretically possible to graduate in as little as 3 months. Since High School normally takes 48 months, even the average graduation duration of 14 months is far better than traditional schooling. Penn Foster is not home schooling, it is a private online high school.

There are 21 courses in the program with a total of 118 tests.  Students complete 1 course at a time and the 5 elective courses are all at the end of the program.  Rather than focus on the courses I prefer to focus on the tests taken as a measure of production, since the number of tests per course can vary from 3 to 6.   Here is a list of the courses my son took.  The last 5 courses are electives, so those can be different, but the rest are required and taken in the order shown.

Note: Intro to Personality Types/Sports by Numbers are both worth only 1/2 a credit, which is why I have them as 1 course together.

How long the program takes to complete depends mostly on how many tests per week a student takes. Since the average student graduates in 14 months, the average student is taking roughly 2 tests per week.  If a student takes 1 test per week the program will take almost 30 months.  While this is still shorter than the 48 months of traditional high school, this does not include any allowances for summer break, winter break, or spring break.  There is certainly a law of diminishing returns around taking more tests.  Going from 1 test per week to 2 tests per week takes 15 months off the program, but going from 5 tests to 6 tests only takes 1 month off the program.

I think a sweet spot in this is to have a goal of 4 tests per week. This is shooting for 1 test per “school” day, but gives an extra day in the school week for if it takes longer than expected.  This results in graduating in just over 7 months. Add in taking off a week here of there for family vacations, winter break, and it lines up with being a Fast Track student completing in 9 months, or 1 total school year.   This schedule also makes it completely feasible to work 15-20 hours per week while in doing the program.

Anything past 5 tests a week is pretty extreme and the added benefit of taking a week or 2 off the total time just doesn’t seem worth it.

Note: Penn Foster states that 15 is the limit, but accounts that are at 15 tests per week or even approaching it have been flagged with Penn Foster looking into the data for suspected cheating.  Just because they in theory allow 15 tests per week, does not mean it is actually achievable over the long term.  Many students have reported taking 2 tests per school day for 10 per week total without running into any issues. This still results in finishing the program in just 3 months vs the theoretical 2 months of taking 15 tests per week.

Increased Opportunity For Work:

Prior to starting this program he had got a part time job working at a Subway in a nearby town.  The Franchisee was willing to hire 14 year old’s and very few places will do this. Because of his school not having set hours he was able to get an exemption on his work permit to be able to work hours during the traditional school day, so long as he didn’t exceed the total allowable hours.  He was averaging about 20 hours per week at work during the school year and then 30 hours in the summer.

The first 6 months his school progress was slow, in large part to the added freedom of being in control of his schedule and the added burden of working during the middle of the day.  He was typically working shifts like 11AM to 4PM.  This made it difficult to partition his day to actually do his schooling.   In February we had a meeting where we pushed him on the accountability of school and he did start moving forward at a better pace.  In June he quit his job and focused on school for July through November.  He had finished about 1/3 of the program from September 2023 to May of 2024 (9 months), then finished the remaining 2/3 between June 2024 and mid November 2024 (5.5 months). Total time from start to finish for him was just under 15 months, slightly above the average mark.

I think for an average student without a job who puts in 30 hours a week into the program it would be very reasonable to expect that it would take less than 1 school year (9 months) to complete the program. This is a real opportunity for kids to earn 2 to 3 years of their lives back from the K-12 system.

What Did He Gain:

By doing this program (and the 8th grade program) our son was able to work while going to school at 14 and 15. He was able to:

• Build a significant emergency fund
• Buy a car
• Build retirement funds to over $10,000 (BTW I didn’t break 10K in retirement funds until 10 years after graduating HS)
• Finish School 1 semester into what would be his Sophomore year, gaining 2.75 years of time
• Break free from child labor laws
• Ability to take college courses:  With a HS Diploma he is able to take community college courses despite being a minor.

In Michigan anyone under 18 is subject to child labor laws, unless they have a high school diploma.  Being 16 and still being in High School limits total work hours to 24 per week when school is in session and 48 hours per week when not in session.  Now that he has a high school diploma, these laws do not apply to him.

How This Extra 2 to 3 Years Really Builds Wealth:

It’s fantastic that our son was able to build a strong economic base during his 8th grade year and his 9th grade year while doing home school programs.  With being off work for the last 5 months he was able to power through the remainder of his schooling.  Now he has 2.75 years available that all of his peers don’t.

My goal would be for him to work close to full time during this time period and bank the vast majority of his income.  If he gets a job right now earning $15 for 40 hours a week, here is what it would look like between now and what would have been his high school graduation date of May 2027.

• 2024 (Dec only): =$15/hr X 40 hours X 4 weeks = $3,600; Saving 75% = $2,700
• 2025: = $15/hr X 40 hours X 50 weeks = $30,000 Saving 75% = $22,500
• 2026:= $15/hr X 40 hours X 50 weeks = $30,000 Saving 75% = $22,500
• 2027 (through Aug) $15/hr X 40 hours X 20 weeks = $12,000 Saving 75% = $9,000

Estimated Roth IRA/401K at 8% annualized returns: *Using 8% vs 10% to adjust for time of deployment for new money, I think 10%+ long term returns are realistic.)

• 2024 ($10,000 current plus $2,700) = $12,700
• 2025: $12,700+ $22,500 = $35,200 * 1.08 =  $38,000
• 2026: $38,000 + $22,500 = $60,500 * 1.08 = $65,300
• 2027: $65,300 + $9,000 = $74,300 * 1.08 = $80,000

At the same time his peers are graduating from high school, most with maybe a couple hundred bucks in their piggy banks, he will have $5,000+ in cash, a  car, and $80,000 in his retirement accounts, as well as over 2 years of steady work experience.  Having 2 years of W2 income and his already existing emergency fund, he could buy his first house at 18.  Decent houses in my area routinely sell for $100,000.  With an FHA loan he could put down $3,500 and move into his first home.

If he never saves another dime and achieves an average 8% return his Roth accounts would be worth:

• At 40: $462,000
• At 50: $1,026,000
• At 60: $2,277,000

It would also be highly unlikely he would stop investing all together because he now will have the experience of seeing the positive effects of saving and investing on his life. Sure he won’t be saving 75% of his income, but 15% to 25% is certainly probable.  His “savings muscles” will be well developed.

Before I get the hate mail: Yes I know that the contribution limit for a Roth IRA is $7,000 and that many jobs do not offer a 401K, especially to employees under 18.  Finding a job that does offer a 401K that he can participate in will be a high priority.  In the event that his job does not have a 401K, his savings beyond $7,000 will be invested in a regular brokerage account, then when he does get a job with a 401K he will increase his 401K contribution to the max and withdraw money from the investment account for living expenses, effectively transferring his money from a brokerage account into Roth accounts in the years after leaving home.  As an example, Walmart does hire 16 year old’s and they are eligible for a Roth 401K upon being hired, and a match after working 1,000 hours in a year.

A Step Further:

I often advocate for young adults to stay at home for 2 years after graduation to bulk up on money.  What if he stays at home until May of 2029 and continues to bank money?  Most likely he will be able to earn more in the market place, so we will assume $20 an hour for this time frame and add in a 6% 401K match.

• 2027: $20/hr X 40 hours X 32 weeks = $25,600 X 75% savings = $19,200 + 6% Match = $1,500 = $20,700 total.
• 2028: $20/hr X 40 hours X 52 weeks = $41,600 X 75% savings = $31,200 + 6% match = $2,500 = $33,700 total.
• 2029: $20/hr X 40 hours X 20 weeks = $16,000 X 75% savings = $12,000 + 6% match = $960 = $12,960 total.

• 2027 ($80,000 current plus $20,700) * 1.08= $108,000
• 2028: $108,000+ $33,700 = $141,700 * 1.08 =  $153,000
• 2029: $153,000 + $12,900 = $165,900 * 1.08 = $179,000

He would be 20 years old with $179,000 in retirement accounts.  If he never saved another dime after this he would end up with:

• At 40 $882,000
• At 50 $1,957,000
• At 60 $4,345,000

Of course this is a positive situation and there are many variables.  If he works 30 hours per week he is still in amazing shape.  If he earns $16 instead of $20 per hour.  If he saves 65% instead of 75%.  If he gets 5% returns instead of 8%.  The inverse is also true.  What if he works 50 hours per week? What if he saves 80%, What if he earns $22/hr?  What if his returns are like this year and he gets 20% plus? No matter what side of these variables happen, if he is working and putting the majority of his income into savings it will have a massive long term benefit.  To quote Dave Ramsey “What if I am half wrong?” Then rather than $180K he will *Only* have $90,000 at 20.

• The odds of being half wrong here are very low, because at this stage in wealth building the vast majority is from contributions.  We have a great degree of control of the total contributions by pulling the levers on hours worked and savings rate. The only part of the equation we don’t have control over is the rate of return.  If the rate of return during this time period was 0% for all years, based on the numbers above he would still have $134,000.

Comparing Retirement Savings:

The median retirement savings by age according to the 2022 Survey of Consumer Finances by the Federal Reserve is:

• <35: $18,880
• 35-44: $45,000
• 45-54: $115,000
• 55-64: $185,000

I also believe that these numbers are for people who have retirement accounts.  The same study showed that 46%, roughly half of people don’t have retirement accounts at all, which effectively means the median retirement savings is actually near $0 for all ages. Only 51% of people 40-50 had over $10,000 in retirement savings.  Only 2% of 18-19 year old’s had $10,000 saved, and 10% of 20-24 year old’s had $10,000 saved.

So when I am talking about a 20 year old getting in a position to have $180,000+ in retirement account assets, this is major. This is starting out with more money in retirement savings than the median person ever acquires.  Now we factor in compounding interest.  If we assume even a low 7% annualized returns, the money would double every 10 years WITHOUT adding any new money.  That’s $360,000 at 30 when most people start saving, $720,000 at 40, $1,400,000 at 50, and $2,800,000 at 60.

If we average 10% returns then the math changes drastically, with the money doubling every 7 years.  Now it’s $360,000 at 27, $720,000 at 34, $1.4 Million at 41, $2.8 Million at 48, 5.6 Million at 55, and 11.2 Million at 62.

This greatly changes the decision trees that young adults can move down.  It makes home formation easier. It makes having children easier. It makes starting a business easier.  It makes the span of jobs and career paths one can choose much wider. It allows more flexibility in future budgeting as retirement is effectively already paid for.

How Many High School Students Graduate Early?:

Penn Foster is the largest high school in the country, largely due to its online nature and heavy advertising.  Despite offering the ability for students to graduate early, Penn Foster has a total enrollment of only 12,453 students as of the 2022-2023 school year.  By contrast, there are 17.3 million high school students in the US.  The norm is certainly for kids to go through 4 years of high school and its a very small fraction of students who have the opportunity to graduate early. Less than 3% of students graduate high school early at all, much less in under half the time. The vast majority of these students finish between half a year and 1 year early.  I strongly believe less than a percent graduate 2 years early or more.

Keep in mind the school system has an entrenched motivation to keep your child in their school system. Money.  The school system is primarily funded on a per pupil basis.  In Michigan this is $9,608 per student per year.  A student is effectively a trapped consumer with a total K-12 value of $124,904.  By leaving the K-12 system at 9th grade this removes 4 years and just over $38,000 in funding from the school.  Of course school administrators don’t want you to get out early!  The early college programs, while potentially beneficial to students are an extension of this, they actually serve the school in getting 1 more year of K-12 state funding for the “5th year of high school”.  It is in the school’s best interest to keep butts in seats.

On a Macro level, this type of schooling is extremely economically beneficial to the taxpayers of the state.  Not only did this cost $1,100 instead of $38,000, it was also 100% paid by the consumer and not the tax payer.  If more students and parents adopt this approach, school districts can consolidate more, making them more efficient and the tax payers at both the state and local level will win.

A more common option than eLearning through Penn Foster or a similar correspondence high school is to take the GED test.  Students who formally leave high school and are at least 16 years of age can take the GED test in some states. Other states require you to be 18.  Some people would prefer to have a diploma over a GED so this is a good option for that.

Who Will This Program Work For?

This type of program is certainly not for everyone.  Students who love sports, like my younger kids, are likely not to be good candidates for a program like this.  Students who are highly social and crave social interaction likewise would not do well.  Students who are not highly motivated and self starters will not do well, as distractions will keep them from moving forward.  Parents who do not have available time for occasionally giving 1 on 1 time when extra help is needed, or who can’t set a schedule and goals for their kids to follow will likely not be successful.  For our family this was the right fit for only 1 of our 4 kids.  With the younger 2 kids I will still strive to get them to work while in high school to develop a strong financial base and then perhaps to stay at home for closer to 3 years than 2 years to be in a great launching spot without graduating early.

What do you think of graduating high school earlier to build a strong financial base? Will you encourage your high schoolers to graduate early?