Is it better to invest in a university degree or the stock market?

Last week, we wrote on how a university degree is no longer a golden ticket to success in Singapore. A large part of our reasoning centred around the argument that a degree no longer acts as an effective signal for job seekers to differentiate themselves from their peers.

We are not suggesting that people stop getting a degree just because it no longer guarantees a high paying job.

However, if your sole aim for attaining a degree is to enjoy better financial returns via higher salary, you may want to consider investing instead.

How much would a degree cost?

The cost of attaining a local degree has been increasing over the years and this is expected to continue. On average, Singapore students pay about $8,000 per year, or about $32,000 in total for a 4-year course. If we include another $9,000 a year for living expenses, this adds up to $60,000 over 4 years.

Read also: Why a university degree is no longer a golden ticket to success in Singapore

How much can you earn if you invest your education fund instead?

If we assume a person invests the $60,000 for 35 years from the age of 20 to 55 at a return of 5 per cent per annum, the person would have about $331,000 at age 55.

Pursuing a degree also means that the person would be working four years less. Hence, there is also an opportunity cost incurred since the person will not earn a salary during those 4 years in school.

If we assume the person earns a salary of $2,000 per month as a diploma holder, that will translate into $24,000 a year, or $96,000 over a 4 years period. If we deduct living expenses of $9,000 a year, the person would have a remainder of $60,000.

If the person invests the full $60,000 for 30 years from the age of 25 to 55 at a return of 4 per cent per annum, he will have $194,000 at age 55.

In total, if a person invests their education fund and the extra money they make through working, they would have an additional $525,000.

Graphic: Dollars and Sense

How much more must I earn to make up the difference?

It's commonly accepted that all things being equal, degree holders tend to earn more than diploma holder. But how much more must a person earn to recover the difference mentioned above?

Assuming a career that span over a 30-year period, a university graduate would have to make at least $17,500 more each year, or about $1,450 each month, in order to make up the difference.

Whether that is easily achievable depends on the sector a person is entering. For some sectors such as the media and the design space, a slightly lower starting salary means the salary gap could be difficult to close unless one is able to advance quickly.

In other industries such as accounting and finance, the chances of having a successful career is higher with a recognised degree. Either way however, there is no guarantee.

To conclude, our views are that seeking to pursue a university degree purely for higher monetary gains is far from a sure bet. Yes, you may earn a higher salary. But whether that amount will end up being higher than simply investing remains to be seen.

Pursue your degree because you want to study and enrich yourself in an area of interest, and not solely because of money. is a website that provides bite-sized and relevant articles to help Singaporeans make better financial decisions.