For many people, the decision on whether or not they plan on pursuing a graduate degree comes down to money. Does earning a Master’s Degree lead to bigger paycheck? Is going back to school worth sacrificing a few years of earning potential? Can I afford to take out student loans to finance further education? When do I have to start putting money away to make sure I can pay for my child’s graduate education?
These were some of the first questions I asked myself when I was considering whether or not I wanted to pursue a one-year MS in Finance (MSF) As an undergraduate student in the Olin Business School at Washington University in St. Louis, the vast majority of my peers will decide to enter the workforce right after graduating. According to school-released data, 96% of the Class of 2014 decided to forego graduate school and begin working. As a member of the 168-person Class of 2015, I figure that there are at most only six other students opting not to begin their careers. In addition to the financial aspects of this decision, there were a few main reasons I opted for graduate school instead of joining the workforce.
Why I Chose to Get A Master’s Degree
My family has always placed a huge emphasis on education. Both of my parents earned graduate degrees before they began working, and my mom finished her MBA when I was a junior in high school while also raising my younger sister and continuing to work full-time. Growing up in a household where both my parents had graduate degrees, I was inclined to pursue my own from the time I was young. I still remember having conversations with my mom in the car on the way to school about where she went to college, what classes she enjoyed, and why she went to graduate school. Even from a young age I was learning the value of further education, and I have my parents to thank for that.
The second non-financial reason I chose to pursue a graduate degree is because I felt that it make the most sense for the career I wished to pursue. I still remember the moment I knew I wanted to study Finance. It was the summer after my freshman year of college, and I knew I had to choose a major by the end of the next semester. I had some money saved up from over the years and my dad suggested that I read a book prior to investing the money. He handed me Larry Swedroe’s The Only Guide to a Winning Investment Strategy You’ll Ever Need: The Way Smart Money Invests Today. It was a terrific read – I remember ripping through it in just a couple of days.
Swedroe talked extensively about why exchange-traded funds were significantly better than mutual funds, due to their lower-cost structure, low turnover, and minimal tax liability. Swedroe’s book taught me not only how implement a low-cost investment strategy but also why the mutual fund industry was antiquated and in need of change. I decided shortly after to study Finance, and found my way to Personal Capital the following summer.
Through my studies and work experiences I’ve realized that my passion lies in asset management, and wanted to pursue a MSF with a concentration in Corporate Finance & Investments. Within the industry, professionals often attain the Chartered Financial Analyst (CFA) designation, a rigorous, three-level program that covers a bevy of investment concepts. I’ve chosen a program that focuses on Corporate Finance & Investments (as opposed to Quantitative Finance) in part because it helps prepare me for the first Level of the CFA exam. Though I’ve known I wanted to pursue a CFA, I also thought that earning an MSF would differentiate myself further.
Though I’ve taken classes in investment theory and corporate finance as part of my undergraduate curriculum, the MSF offers many more in-depth courses in each of these disciplines. For example, I’ll be taking three corporate finance courses, one each in valuation, financing, and new research in valuation; these are topics I spent a few class periods on as part of my undergraduate corporate finance course, but focusing on each of these disciplines within corporate finance will allow me to study the material more in-depth. Additionally, the MSF curriculum offers more finance electives than were offered at the undergraduate level, such as Real Estate Finance and Venture Capital & Private Equity.
I also thought about the downside risk I would incur – if I got laid off early on in my career or the economy went through a recession would I still feel comfortable with my chances of having a job? I believe that having a graduate degree would protect me in those scenarios.
Specialized Master’s Programs, such as the MSF, have been growing in popularity. They have been quite popular in Western Europe and the United Kingdom for quite some time now, but have only recently become a viable alternative to MBAs. That being said, Warren Buffett has a MS in Financial Economics from Columbia Business School, as opposed to an MBA.
In addition to the qualitative reasons I’ve stated above, there are also financial reasons why I believe an MSF is quite beneficial. From a pure cost perspective, a one-year MSF program is cheaper than a two-year MBA program, considering that is one year less of tuition. Considering the return on graduation, as given by the graph below by the Department of Education, simply having a graduate degree in addition to an undergraduate degree will pay dividends down the road at a much lower cost with a smaller risk of unemployment.
Furthermore, the job market compensation company PayScale finds that the average salary for an employee with a Bachelor’s in Finance and less than one year of work experience is almost $15,000 less than the average salary for an employee with a Master’s in Finance and less than one year of work experience.
Though the difference in reported salaries between BBA and MS degrees in the above graph is sizable, I believe that the vast discrepancy in salaries mitigates the difference in sample size. Furthermore, the data shown above provides me with the confidence that pursuing an MSF is the right decision both financially and qualitatively.
This program doesn’t require any previous work experience (due to its focus on technical financial analysis as opposed to leadership skills), allows me to continue developing relationships I’ve built with classmates and professors, allows me to take numerous electives to tailor my degree to courses I’m interested in, and prepares me to takes the CFA Level 1 Exam. This is a great fit for me, and I’m excited to begin.
A key part of the decision to enroll in a graduate program is the financial impact. However, an equally key thing to consider is the qualitative reason to pursue a Master’s Degree. Will you regret not doing it? Will you be better off in the long-term, even if you’re forced to contend with a short-term cost? Will it differentiate you from your peers?
What other reasons motivated you to get your graduate degree or even inspired you to forego one to continue on your career path? We’d love to know.