Invest 20 thousand baht a month for a Harvard education!
A column by Buffettcode
Harvard is the dream of both students and their parents. Almost every young person wants to get in, and that's what their parents want for them too. Attending Harvard requires that you be both an exceptionally smart and if you don't have a scholarship, an exceptionally rich person.
About 42 thousand people apply to Harvard every year, but less than two thousand make it in. The acceptance rate is only 4.6%, which means that only five out of every hundred applicants make the grade.
This low acceptance rate makes Harvard the most difficult of all Ivy League universities to get into. You can compare it to Cornell at 10.3%, Yale at 6.3% and Princeton's 5.5% acceptance rate.
Not only is it difficult to get accepted to Harvard, but it also has very high tuition fees and other expenses. The average student at Harvard pays around 2.4 million baht per year, and the minimum time required to obtain a graduate degree is two years. This means that the cheapest degrees at Harvard cost about 4.8 million baht, which is equal to buying one Mercedes Benz CLS 300d AMG in 2018.
However, you need to consider the main benefit of the great effort and expense of a Harvard education, which will be your salary as a Harvard graduate. Education is one way to get an excellent return on investment. Most people don't factor this into their decision because they are too focused on Harvard's huge tuition expense when comparing it to other universities.
Are you aware that Harvard graduates earn more than twice as much as graduates from other universities in the United States? A typical university graduate in the US can expect to earn about 30 thousand dollars per year or approximately 930 thousand baht, but a Harvard graduate earns 80 thousand dollars a year on average or about 2.4 million baht. Does that number sound familiar? Yes, because that's the same amount you pay each year in tuition at Harvard, as mentioned above!
Now, I want you to imagine yourself as a Harvard graduate with a 2.4 million baht yearly income. You spend half of your income and save the rest, which is 1.2 million baht. Therefore, you will get a full return of your capital expense in just 4 years by saving 1.2 million baht every year, based on the 4.8 million baht tuition you paid. After that, you can save, invest or spend all the money you make as you desire. Moreover, certain degrees from Harvard can result in incomes of around 200 thousand US dollars per year, or approximately 6.2 million baht, and then you would get a full return on your investment in only one or two years!
If you've read this far, you now see that an investment in education is a worthy one. However, if you do not have enough money to make such a large investment in the first place, then what can you do? My answer is that you use time as a tool! But how can time be used as a tool? What I am trying to say is that, instead of working extra hard, just take extra time and use it to leverage some investments.
No one thinks that setting aside just 20 thousand baht per month can make their Harvard dreams come true. After all, if you do nothing but save 20 thousand baht every month, it will take 20 years to add up to the 4.8 million baht you need, and no one thinks to save for 20 years, right?
Well, believe it or not, if you invest 20 thousand baht every month at a 12% interest rate it will add up to 4.8 million baht in just 11 years! This reduces your time by nine years, and you can do even better than that. But even a low 7% interest rate will reduce your time by seven years.
And what if you can afford to save more? By investing 30 thousand baht a month at a 12% interest rate, it will only take you eight years to get to Harvard. If you are able to save this much money every month, then you could still make your goal in 14 years, even if you didn't invest and only kept your money in a savings account at the bank. This is what I meant when I said that "time" is a tool that can help. In order to use this particular tool properly, you need to invest your money in something with a good return, rather than just letting it sit in a savings account.
Saving and investing can be done for purposes other than retirement. One method of achieving an exceptionally high return on your money is to invest it over time while you save for an education. Then comes the education itself, which is one of the best investments you can ever make. When you use the tool of time combined with investment, then you will find that it doesn't take long before you are living the good life.