By Lee Sherman
Conventional wisdom has it that earning a masters in business administration (MBA) will automatically help your kids get a high-paying job when they graduate. While it’s still true that potential employers look favorably upon an MBA from top-tier business schools like Harvard, Wharton, or Stanford (and may even require one for management positions), the path to financial well-being is less assured than ever.
The extra time and expense it takes to get an MBA may not be worth it, especially in places like Silicon Valley where high-flying startups are looking more for real-world experience and a track record of success. To perform a cost-benefit analysis of an MBA, you take the cost of the MBA and divide it by the increase in salary expected. An MBA degree from a top school can cost as much as $100,00. If that results in a salary increase of $25,000 per year, you’ll recover its cost in four years. On the other hand, staying in school longer will delay entry into the workforce. After attending and graduating from a 4-year college, it will take an additional 2-3 years to earn an MBA.
Alternatives to the standard MBA, provide a compromise and are less expensive. There are two other types to consider. An executive MBA (EMBA) is for people 32-42 years old who are already in a management role and are looking to expand their skills. Many employers will pick up the tab for these programs. Unlike a regular MBA program, where grades are what matter most, an EMBA program puts the emphasis on work experience. Another kind of part-time MBA, for 24-35-year olds, is designed for promising students who are not yet in management or other leadership roles. If your student decides to go this route, they’ll need to work hard. For most, it means working a day job while taking classes at night.
That hard work can pay off. If your student plans to found or run a company, the skills picked up in business school can be invaluable, and in some fields such as finance, even critical. Even in Silicon Valley, which is more of a Wild West when it comes to qualifications, someone with an MBA may be hired to provide “adult supervision” for a visionary founder with big ideas but less experience.
So, while from a purely mercenary calculus, an MBA may no longer make the same sense it once did, it’s important to note that MBA programs teach much needed business administration skills and, perhaps even more importantly, provide your student with a network of business connections that will last a lifetime. That’s the true value of an MBA.
Lee Sherman is a contributing writer to MyPerfectFinancialAdvisor, the premier matchmaker between investors and advisors. Lee is an experienced journalist and editor with over 30 years of expertise with a significant history of writing in the personal finance and technology arenas.
