How interest rates affect education
MANY believe that interest rate hike dampens the market sentiments as it favours savings and discourages spending.
But what is the implication of interest rate hike on individuals who intend to pursue tertiary education? Should they consider or abandon spending on further studies in this scenario?
According to KDU University College’s head of the School of Business Dr Brian Wong Kee Mun, it is theoretically the norm that interest rate hike generally affects consumer spending.
However, it is also a sign of market readiness for the government to decide on interest rate hike.
He elaborated, “There are two ways to look at interest rate hike:
“First, an interest rate hike has an inverse impact on consumer spending as it encourages savings; second, it has a positive impact on interest income.
“As more disposable income is available, spending will be encouraged. However, in a general scenario, the negative impact may outweigh the positive, causing a less positive interest rate hike on consumer spending.”
Nevertheless, he suggested that people should be aware that the hike also encourages consumers to thoroughly consider their spending priority.
If education is considered as an expense, the priority to spend on further studies will be lower during this time.
However, if people equate education to investment, which they should, the yield from further studies is given priority.
“One should view education as an investment instead of an expense. The rationale is simple:
“Further studies enhance an individual’s knowledge and skills, enhancing their capability to harvest higher income generation opportunities,” he added.
“In situations like during an interest rate hike, one should think twice on what to spend. Spending on something that yields in the long run like education is a better choice.”
He equates the outcome of an investment in further studies to the concept of interest earned in bank deposits due to interest rate hike.
He added, “The yield from education investment may not be visible in the immediate term, but when it is accumulated through a certain period of time, just like the compounded interests earned in bank deposits, the yield will make a difference to the individuals in the long run.”
Dr Wong has been awarded a Doctor of Philosophy (PhD) in Management by the University of Malaya.
Prior to leading KDU’s School of Business, he held senior management positions in local and multinational companies such as Panasonic, Lafarge, Malaysia Healthcare Travel Council and the Putra Business School.
He added that KDU’s School of Business is currently developing the concept of personification of matters through the humanistic entrepreneurialism philosophy, to better understand matters in the human perspective.
He explained that people can personify matters and understand them like human beings.
By personifying “interest rate hikes”, one sees this as “a person” who brings fortune to the bankers and their depositors.
It also acts as one who reminds others to prioritise their spending, like education.
And by personifying “investments in further studies”, such “a person” would be able to bring fortune if one knows how to work well with that character.
Bank Negara Malaysia raised its overnight policy rate on Jan 25 this year, which has been used by banks to calculate interest rates, from 3% to 3.25% – citing a stronger domestic and global economy, the first time in four years.
As a testimony to KDU’s dedication and commitment to its brand and academic excellence, the institution was recently awarded the Putra Brand Awards 2017 in the Education and Learning Category.
■ To find out how you can turn your world into global success with KDU University College, come to its Open Day from now to March 25, log on to www.kdu.edu.my or call 03-5565 0538 (KDU University College, Utropolis, Glenmarie) / 03-7953 6688 (KDU College, Damansara Jaya).