Human capital - the value of your ability to earn - is usually worth far more than a young person's savings. Education, skills and health are ways of investing in it, with real costs and uncertain returns.
9 min read · Level 1
I think the single most useful reframing for a young investor is that the portfolio that matters most is the one they cannot see. It changes which decisions deserve attention: whether to switch jobs, learn a skill or protect their health can move their lifetime wealth far more than any fund choice. That is not an argument against saving; it is an argument for noticing where most of the value actually is.
Human capital is the economic value of your capacity to earn over your working life. It is not on any statement, but for most people early in their careers it is their largest asset by far.
A simple illustration: someone earning 50,000 a year for 40 years earns 2,000,000 in total, before any raises. Because money received later is worth less than money today, a fairer comparison discounts those future earnings. At an illustrative 3% discount rate, 50,000 a year for 40 years has a present value of about 1,156,000.
Financial savings of a typical early-career worker small Present value of future earnings about 1,156,000 in this example
Investing in yourself means spending money, time or effort to increase that value or protect it:
Type Examples How it adds value Education degrees, qualifications, courses access to higher-paid work Skills a language, software, a trade, management higher productivity or pay Health sleep, fitness, preventive care more working years, fewer disruptions Network relationships and reputation access to opportunities
Like any asset, these have costs, uncertain returns, and can lose value over time.
Because it reframes early financial decisions. A young person agonising over a small investment portfolio while ignoring their earning power is optimising the smaller asset.
It also brings discipline to spending on yourself. Treating a course or qualification as an investment invites the same questions as any other: what does it cost, what might it return, and what could go wrong.
And it is honest about limits. Human capital cannot be diversified easily, sold, or reliably valued, and a single job or industry can dominate it.
Educational, not personalised financial advice. Nothing in the Investor Academy is a recommendation to buy, sell or hold anything — what is right for you depends on your own circumstances and the rules where you live.
Two 25-year-olds.
Person A: 20,000 in investments, earns 40,000, no plan to develop skills Person B: 5,000 in investments, earns 40,000, spends 3,000 and evenings on a qualification that raises pay to 46,000
Person A has four times the financial assets. Person B has increased the asset that matters more at this stage: an extra 6,000 a year before tax, over decades, dwarfs the 15,000 difference in savings - if the pay rise lasts and the qualification is actually valued in their field.
Treating any spending on education or self-improvement as automatically an investment. It is only an investment if there is a plausible return; otherwise it may be valuable for other reasons, but it is consumption.
Multiply current earnings by expected working years, and note that the present value is lower because of discounting.
Write down skills, qualifications, health habits and relationships that would affect your future earnings.
For each item, note whether you expect a financial return, a personal benefit, or both. Both are legitimate, but only one is an investment case.
When early in a career, considering a change of field, or deciding how to split money and time between saving and self-development.
Do not use human capital as a reason to neglect savings entirely. Earnings can fall, jobs can be lost and health can change, so financial assets still matter.
Labour market data published by statistics agencies in many countries show that earnings typically rise most steeply in the first one to two decades of working life and flatten later, with wide variation by occupation and education.
Skills developed early have the longest time to pay off, which makes the first decade of a career an especially valuable time to invest in them.
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