How education can boost the value of your most important asset – you

PUBLISHED : 7 days ago from Financial Review Smart Investor

Investing in shares, property and income products is all well and good, but you should know by now that the best investment you can ever make is in yourself. Even the finest money minds in the country suggest investing in education and training as one of the best uses of $1000 or $10,000.

It may not be a cheap exercise, depending on what line of study you choose. But it will be worth it, and the total return on your investment after just five years will surprise you.

Undergraduate study

If you joined the workforce straight from school you may have been smart or lucky enough to climb the corporate ladder through sheer blood, sweat and tears.

But there are others who may not have seen their salaries increase as much as they would have liked and therefore may be considering a career change. Or, bottom line aside, they may be tired of teaching, for example, or having worked in hospital in administration may wish to join the caring professions of medicine.

The good thing about undergraduate study is that for an Australian resident most spots in public universities are Commonwealth supported places (CSP), making a huge difference to the cost.

In accounting, for instance, the maximum annual CSP rate was $8859 in 2010, or about $27,000 over three years. That’s less than half what a full-fee student would have to cough up over the same time – the average fee for an international student is $58,158.

The starting salary for a graduate accountant was $46,153 in 2010 but at the end of five years you could be earning an average of $70,000 in Sydney, or $65,000 in Melbourne and in Queensland.

Long-term earnings potential

If you’ve been in the workforce for some time before undertaking a career change there’s also a chance your experience will be taken into account in your first graduate position, which could mean a slightly higher salary than the average for someone leaving university.

Your long-term earnings potential will also be greatly improved. A finance director or chief financial officer at a company turning over more than $150 million per annum earned an average of $260,000 a year in Sydney in 2010, for example.

Such positions would involve additional study in the form of CPA or CA accounting qualifications, but your undergraduate degree will have put you on the right track.

Something extra

After a few years in the workforce, many professionals discover they’re stuck in a rut or can’t move beyond – or even into – middle management. They may be excellent professionals in their chosen field but struggle when it comes to management or business development.

It’s at this point that many decide to study for a master of business administration.

“Mostly I think people look to do an MBA because they want to do something to make a difference in terms of their career,” says the MBA program director at University of Queensland Business School, associate professor Polly Parker.

World class

Australia is one of the best places in the world to undertake an MBA, with four of our business schools appearing in the top 100 schools for MBAs worldwide, as judged by The Economist magazine.

In October last year another study, the QS Jobs and Salary Trends Report, found Australia had the second-highest MBA graduating salary worldwide, averaging $US117,800 ($115,330).

The Melbourne Business School says the class of 2011 achieved an average increase in their base salary of 58 per cent after attaining their MBA, while the University of Queensland Business School reported a 55 per cent increase in post-MBA salary three months after graduation.

Useful exposure

“The exposure an MBA gives you to different functions is indispensable,” Melbourne Business School market insights manager Pete Manasantivongs says. “Students learn how to tackle a situation from a number of perspectives, not just the function they specialised in before their MBA,” he says.

“Marketing specialists gain a more profound understanding of finance; the people running operations see how their decisions and actions affect the corporate strategy,” he says.

The style of teaching of MBAs at the top schools has changed dramatically over the past decade because of advancing technology. MBA students want more from the experience than learning by numbers or a slightly advanced undergraduate degree.

“With any new delivery mode, like online, you have to make sure you have a degree of interactivity,” Macquarie Graduate School of Management deputy dean Guy Ford says. “Self-paced learning isn’t what they’re looking for at this level.”

Elyse Henderson is a regional business executive with National Australia Bank in Queensland. She completed her MBA at UQ Business School in 2008 and says her salary has increased at least 30 per cent as new career opportunities have opened up.

Peer groups

“Since I’ve been at NAB, I’ve had two promotions and I’m managing a senior business unit in Queensland,” Henderson says. “I don’t think that would have happened without the MBA.”

MBA courses often involve “Harvard-style” learning, where students form groups, are assigned real-life business problems and present their solutions to the class.

“The peer group is very important in an MBA, when you’re working with adult learners.

“It’s not downloading information from a lecturer, it’s very much about the calibre of the cohort so they can share experiences,” UQ’s Parker says.

Network building

Importantly, MBAs aren’t just a form of education, they also provide a network of fellow students and alumni (known colloquially as alums) that can further help advance your career.

Some students choose their business school based on these networks.

Henderson’s experience highlights how a network can operate. She was contacted by the UQ Business School’s career office regarding the program at NAB under which she’s now employed. That opportunity would not have opened up if she hadn’t enrolled in, and completed, the course.

The rankings of MBAs by external companies take into account the quality of the network and the alumni.

“Strong relationships with the business community are also key to a school’s relevance,” says the Melbourne Business School’s Manasantivongs.

MBA graduates tend to stay very much involved with their schools.

“Mostly we find people do get promoted or are able to use the MBA to change jobs into a different industry. That’s where it’s good to talk to the alums,” Parker says. “One of the reasons the alums stay involved is to support other people … and they’re talent spotting.”

Due diligence

But MBAs don’t come cheap. The average cost of an MBA at the top four business schools is $50,250. So, just like any other kind of investment, you need to do proper due diligence before you commit your time and money.

“Many come in and sit in on classes, to try to get a feel,” says Macquarie Graduate School of Management’s Ford. “I’d strongly recommend that. “If you’re going to invest something like $50,000 you need to come and make that investment in time to see what the classes are like.”

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