I'm Andy Temte and welcome to Money Lessons! Join me every Saturday morning for bite-sized lessons that are designed to improve financial literacy around the world. Today is October 24, 2026.
Two weeks ago, we said that your earning power is the biggest asset you own, and last Saturday we said that where you spend your working hours is the biggest investment decision you make. I promised that today we'd take up staying relevant: treating a new skill as an investment — what it costs, what it returns, and when to make it. So today we'll define three terms, look at why skills go stale, ask of a new skill the three questions we'd ask of any investment, and I'll give you one question to ask your manager this week.
Three Terms We Need
Let's start with three definitions.
The first term is competence, and we've defined it before. Back on February 1st of last year, we said that competence is a portfolio that consists of knowledge, skills, abilities, and attitudes. Your human capital is that competence, plus your experience and your health. Today we're working on one part of the competency equation: skills.
The second term is skill gap. A skill gap is the difference between the skills a job requires and the skills you have right now. If the job you want next requires reading a financial statement and you can't yet, that's a skill gap. If the software your job runs on was replaced this year and you're still learning it, that's a skill gap too.
The third term is really two terms, upskilling and reskilling, which get used as if they meant the same thing, and they don't. Upskilling is building a deeper or newer version of a skill you already use in the work you do now: the bookkeeper who learns new accounting software is upskilling. Reskilling is building a skill for different work: the bookkeeper who learns to write AI prompts for a new job is reskilling. Upskilling closes a skill gap in the job you have; reskilling closes the skill gap to a job you don't have yet.
With those three terms defined, let's look at why a skill gap opens in the first place.
Why Skills Go Stale
Skills go stale for two reasons: the skills a job requires change over time, and people resist change. Let's look at each one.
The first reason — that the skills a job requires change over time — has been measured. The World Economic Forum, an organization based in Switzerland best known for its yearly Davos meeting, has surveyed large employers about the skills they expect to need, about every two years for the past decade, in a report called the Future of Jobs. In the current edition, published in January 2025, more than a thousand employers, who together employ more than 14 million people, reported that workers can expect 39 percent of their existing skills to be transformed or become outdated between 2025 and 2030. The employers in that survey also named what's driving the change: 86 percent of them expect advances in artificial intelligence and information processing to transform their business by 2030.
The second reason skills go stale has nothing to do with technology: people resist change, and that is not new. In 1979, John Kotter and Leonard Schlesinger wrote in the Harvard Business Review that people resist a change at work for four common reasons: they expect to lose something they value; they don't understand the change, or don't trust the people making it; they believe the change doesn't make sense for the business; or they have a low tolerance for change itself — a fear that they can't learn the new skills and new behavior the change asks of them. The fourth reason — a low tolerance for change — is the one that matters most today, because a person who is afraid they can't learn a new skill is the person whose skill gap stays open.
One of my mentors, the great Carl Schweser, used to tell me, "Andy, if you're not moving, you're standing still." I first shared that line with you on January 18th of last year, and it's where the title of my forthcoming guidebook, Stop Standing Still, comes from. Carl's line applies directly to skills. When skills fade, the earning power they command fades with them.
What a Skill Costs
So a new skill is an investment, and we can ask of it what we'd ask of any investment: what does it cost, what does it return, and when should you make it.
The cost of a skill has two parts. The first part is money: tuition or fees, and books, software, or a laptop if the program needs one. The second part is time, and time is the part most of us underestimate, because nobody sends you a bill for it. Every hour you spend in class, studying, or practicing is an hour you can't spend working a second job, enjoying your family, or recharging, so those hours have a cost. To count it, estimate the hours acquiring the skill will take, then put a price on one hour of your time. Only you can set that price: it might be what an hour of your free time is worth to you, or what someone would pay you for that hour. Hours times the price is the cost of your time.
Fun fact, your employer may be able to pay part of the monetary cost, and you won't pay a dollar of tax on it. The tax code has a rule called educational assistance: an employer with a written educational assistance plan can pay up to $5,250 a year toward an employee's education — tuition, fees, books, and supplies — and that $5,250 is not counted as wages on your W-2, so no income tax, Social Security tax, or Medicare tax comes out of it. The tax law signed on July 4, 2025 made two changes to that rule. Since 2020, an employer had been allowed, temporarily, to put that same $5,250 toward payments on an employee's student loans instead — principal or interest — and the new law made that permanent. And starting in 2027, the $5,250 limit will rise with inflation.
What a Skill Returns
Now let's look at the return of the skills you build, and this is the lesson we promised two weeks ago on whether a particular credential is worth what it costs. The return on a skill is the pay it adds, every year, for as long as the skill remains relevant and keeps earning. Suppose a certificate costs $3,000, and suppose that once you have it, your pay rises enough that your net pay — the amount that reaches your bank account — goes up by $2,000 a year. How long until the certificate has paid for itself? Divide the cost by the yearly return: $3,000 divided by $2,000 a year is one and a half years.
That payback calculation left two things out, and both of them matter to whether the certificate is worth it. The first thing it left out is your time. Suppose the certificate took 100 hours of your own time, and suppose the price you put on an hour of your time is $20. Then your time cost $2,000, and the full cost of the certificate was $5,000: $3,000 in money and $2,000 in time.
The second thing the payback calculation left out is how long the skill will keep earning. The extra $2,000 a year arrives only for as long as the skill stays relevant, and skills go stale. Suppose the certificate is in a software tool you expect your industry to use for about five more years. Five years of $2,000 is $10,000 of return. Subtract the full cost of $5,000, and the certificate returns $5,000 more than it cost, so on these numbers it's worth doing. Now suppose instead that the tool will be replaced in two years. Two years of $2,000 is $4,000 of return against $5,000 of cost, and on those numbers it isn't.
What we just did has a name in finance: net present value, which is the value today of everything an investment returns, minus everything it costs. That was the rough version. The precise version takes each future year's $2,000 and reduces it to what it's worth today, because, as we said two weeks ago, a dollar today is worth more than a dollar tomorrow; we'll do that math in a later series. For a decision about a certificate, the rough version usually answers the question. Count the money, count your time, count the years the skill will keep earning, and ask whether the return is comfortably bigger than the cost.
Before You Need It
That leaves the third question: when to build the skill. Two weeks ago we said that a durable skill you build this year gets raised every year for the rest of your career, so a skill built earlier earns for more years than the same skill built later. That is the first reason earlier is worth more. The second reason is the one I'd like you to remember: build new skills before you need them. The worst day to discover a skill gap is the day a termination letter arrives, or the day your employer announces that the job is changing. On that day, the two or three years a master's degree can take are two or three years you don't have. Build new skills while you have a job, while an employer is paying you, and while that employer may pay up to $5,250 a year of the cost.
All of that assumes you know which skill to build, and the hardest skill gap to close is the one you don't know you have. So here are two conversations to have, each with one question.
The first conversation is with yourself. In Stop Standing Still, one of the questions I ask is: what skills do you need to develop to reach your goals? Write down the job you want next — or the job you have, as it's changing — and under it, list the skills that job requires that you don't have today. That list is your skill gap, in writing.
The second conversation is with your manager, and it's a different conversation from the one we talked about last Saturday. Last Saturday's conversation was about the fit — which parts of the work you want more of, and which parts you want less of. This conversation is about skills, and I recommend you start small: "What's the one skill I don't realize I'm missing?" Your manager sees your work from the outside, and can name a gap you can't see from the inside. You learn which gap to close first, and your manager hears that you intend to close it. Then ask one more question, not only of your manager but of whoever handles benefits where you work: does the company have an educational-assistance plan, and what does it pay for?
What This Means for You
There are two things to focus on from today's episode.
First, a new skill is an investment, with a cost, a return, and a timeline, so treat it like one. Put a number on the cost, in dollars and in hours of your own time. Put a number on the return, in net pay per year, and on the years the skill will keep earning. And remember the caution from two weeks ago: a raise compounds only as long as the skill behind it keeps earning, so build skills that are more likely to last.
Second, your employer may pay for it — up to $5,250 a year, with no tax on it — but only if a plan exists.
Next Saturday we take up getting paid for the skills you build: raises, promotions, and changing jobs — three ways your pay grows.
Until next week... Grace. Dignity. Compassion.
