Saving for Your Child’s Education in Japan

Options and Recommendations

As a parent living in Japan, one of the biggest concerns you may have is how to save money for your child’s education.

Educational expenses in Japan can range from a couple of million (going to public schools and avoiding expensive after-school activities and cram schools) to close to 100 million yen (going to the most expensive private schools).

You kind of get to choose how much you pay, and there are a a number of options when it comes to getting the money ready.

Saving Cash

If you need the money in the next few years, you can save it as cash either in your own account or in your child’s. Keeping the money in your name is easier and more flexible, but giving it to your child now could reduce gift or inheritance tax later.

Investing

If you won’t need the money for longer, you can invest it in your own broker account or in your child’s. Investing in your own NISA account allows the investments to grow tax-free and can be used for educational or living expenses for your child when they need it. However, if you are already using all your tax-exempt accounts and still have extra money to put away, giving the money to your child now may make sense to save on gift tax later.

Junior NISA

Until the end of this year, you can open a Junior NISA account for children under 18. This allows them to invest up to 800,000 yen and any capital gains or dividends will be tax-free until the child reaches 18. For young children, this is a great opportunity, but you need to act quickly to open and fund the account this year. Once the child is 18, they will have control of the account and can spend the money (hopefully on education rather than clothes and video games) or possibly roll it over into an adult NISA account.

Education Saving Plan or Insurance Policy

You can also consider buying an education insurance policy where you save money with an insurance company and they provide a life insurance element. However, this option is rarely a good one compared to saving or investing yourself, unless you need the discipline that a third party can provide.

Recommendations

For most people, we recommend saving or investing yourself, then paying for the child later as needed. If you are wealthy, saving or investing in the child’s name may also be a good option. Avoid education saving or insurance products in Japan, as they are rarely a good choice compared to DIY.

US Citizens

If you (or your children) have US citizenship or dual US and other citizenship, be cautious about investing in products outside the US and consider opening an account with an American financial institution.

Wealthy parents/grandparents

Those with well-off parents or grandparents may be interested in the tax-free gift for educational expenses system (just renewed for a further three years, currently expires after 2026).

This allows parents or grandparents to give a one-off tax free gift of up to 15 million yen to be used towards educational expenses. This isn’t strictly necessary as grandparents are able to pay for educational expenses anyway, but provides a way to front load the system or reduce the size of estates for wealthy people.

Finally

In conclusion, there are several options available for saving for your child’s education in Japan. Consider your personal circumstances, financial goals, and risk tolerance when making a decision.

If you have questions about this topic, please visit the forum and ask there. We have a number of members who have navigated this system already and can talk about their experience and provide advice.