Johannesburg - If you’re unsure whether you should enrol at varsity or college, take a moment to calculate the opportunity cost involved.
In other words, use your head and do the sums: “It is worthwhile doing the math and it’s quite easy too,” says Ari Katz, chief executive of Boston City Campus & Business College. Calculating opportunity cost boils down to calculating how much you stand to gain from tertiary studies.
“Then you measure it against what you stand to lose out on if you skip studies.
“Most of us will choose to study when we know that studying will get us great career opportunities and salary in the future,” Katz points out.
To help you weigh up study costs versus career benefits over a lifetime, Katz uses a practical example.
Imagine that Jenny and Lebo are best friends who finished matric last year. They’re both 19 years old and expect to work until they are 60. In true BFF (best-friends-forever) fashion the two young women sit down to discuss their future.
Jenny decides that she doesn’t want to study because she wants to start earning money as soon as possible. So she applies for a whole lot of vacancies. A gym close to her home likes her CV and offers her an entry-level position. She is as happy as can be. She will get some experience and slowly work her way up in the company to become the administration manager.
For simplicity’s sake, say that Jenny will earn an average of R80 000 a year, from the very first year of work. She will work for 40 years and over her working lifetime, she will earn a total of R3 200 000 (R80 000 x 40 years).
Imagine that Lebo on the other hand decides that she wants to study and enrols at the local college. She enrols for a BCom honours degree. Her degree is four years long and costs R25 000 a year, which she pays by taking out a student loan.
After she has completed her degree, she starts off as a trainee. She moves jobs a few times and moves up the career ladder as she has a wide network of friends and contacts that she made while studying. She eventually becomes the financial manager of a big company.
Let’s assume that due to her qualification and varied experience, Lebo earns an average of R360 000 a year, from the very first year of work.
Lebo will work for 36 years (she studied for four years) and earn a total of R12 960 000. She will have to pay back her student loan of R100 000 and so she deducts that money from the total income. In total, she will therefore earn R12 860 000 over her lifetime.
At the age of 60 when they retire, Jenny will have earned a total of R3.2 million while Lebo will have earned R12.8m. Lebo’s degree therefore can be said to give her an advantage of R9.66 million.
“The example of Jenny and Lebo shows how important it is to factor the opportunity cost into study and career decisions,” Katz points out.
When calculating the opportunity cost in your own life, try to use actual figures. Get prices of courses and get salary figures from recruitment agencies so that you can arrive at realistic figures.
Katz also explains that not all courses are the same.
“Some courses of study are more in demand with employers than others,” he says. “If you complete a qualification in accounting or in teaching, you are likely to find a job quickly.
“This is not the case with other qualifications and you need to factor into your calculations the possibility of going without a salary while you look for work. You’ll see that once you get the hang of opportunity cost calculations, you’ll be able to make good, solid decisions.”
* For more information, contact Boston City Campus & Business College at 011 551 2000, email [email protected], visit the website at www.boston.co.za or visit them on Facebook.
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