Does it really cost 30 million yen to raise a child?
We had an interesting question from a reader a couple of weeks ago. They wanted to know if raising children in Japan really cost 30 million yen per child. Let’s take a look at that number and where it comes from (and if it is true!).
30 million yen to raise a child?
The first thing is that any average number is not going to work for everyone (or even anyone?). Much like the government’s ‘people will need an extra 20 million in retirement to supplement nenkin‘ numbers, it is much better to think about your own situation and try to calculate your own numbers.
The linked article uses the same kind of numbers that financial planners pull up: averages based on assumptions. A lot of that 30 million is based on optional educational expenses: private schools, extracurricular activities (ηΏγδΊ), cram schools, and university.
The real numbers
It’s definitely possible to raise a child for a lot less if you choose not to pay for these things. After all, housing and food costs do not increase linearly with each extra person (it’s a lot cheaper per person with two, three, four people) and it is very much possible to have fun and do well academically without paying for extra classes. In fact, some of the best students I have met did not go to cram school but rather studied by themselves or with their parents.
The curse of internationalism
On the other hand, particularly for international families, it is possible to spend a lot more. Family trips abroad with children do scale linearly, and taking the family back to Europe for a couple of weeks in the summer can often cost as much as a small car π
My kids also went to study abroad a few times, which can also be extremely expensive.
Selective spending
However, when they went to university they got loans, so we only had to cover the entrance fees and living expenses (they lived at home and went to local unis).
My wife reckons they cost us about 15 million each, so 45 in total. Sadly we didn’t really track this so we don’t have accurate numbers.
Where you live is also going to make a huge difference (Tokyo is more expensive than rural Iwate) as will your lifestyle (do both parents work? Are grandparents or other family nearby?).
At the end of the day
So we kind of come full circle: average numbers are not going to work for any given person. The cost of raising children in Japan is probably between a few million yen and tens of millions, depending on what you choose to pay for. As in all personal finance, deliberate spending will be the key: don’t spend money on things you don’t value so you can spend it on the things that do matter.
How to save the money
There was also a supplementary question: where to save the money to pay for kids’ educational expenses?
There are a wide variety of options, and this being Japan of course there are plenty of insurance companies that would love to ‘help’ you with this.
A quick look at kakaku.com shows that insurance companies are roughly guaranteeing a 100% return over 22 years. This is a bit underwhelming, but they also include life insurance against the parent, etc.
Personally I would be inclined to have the parents invest normally using NISA accounts, taxable investment accounts, and cash savings. That way they have the money and there is no restriction on how it is spent or when it can be used. If a family has a lot of extra funds, they could also invest in a Junior NISA account in the child’s name (this money would be tied up until the child is 18 though). Don’t neglect to consider student loans too -you can always help with paying them off in the future if you choose to, whereas if you just pay for everything in advance you lose the element of choice.
How about you? How much do you think raising a child costs in Japan? Any good ideas for how to save/invest for educational expenses?
In regards to regular fees for school lunch, lessons, an education savings account and other extra curriculars we spend 624,000 a year. That of course does not include food, clothing, toys trips etc.
160,000 comes in through the Kodomo Teate system, so that probably covers the food and clothing at least, and possibly part of the rest.
Over twenty years that would be a bargain 10m yen net! Although food clothing and in particular trips might add quite a bit to that.
Thanks for the data point π
I thought there was a recent update from the Japanese government that they were ending the NISA program? I cannot find the article I saw.
NISA has always had an expiration date: it is a ten-year program due to run until 2023 (2023 will be the last year you can open an account). Junior NISA is on the same timetable.
There is always a chance the government will choose to extend the program or replace it with something similar or better.
Tsumitate NISA is currently due to run until 2037.
Never kept track of raising kids here. Why would anyone want to torture themselves with such things.
You have kids because you want to experience it and bring little ones into the world so they can follow through on what you experienced and hopefully make this world a better place.
It is biologically impossible to try to prevent this situation, and all cool with me.
I spent about twenty bucks on my kids today. Fantastic bbq.
I think you are missing the point
Hey–I like that! While I’ve disagreed with some of your posts in the past, I think you are spot on here.
Hi Captain! I have disagreed with some of my own past posts as well. I post to make others think out of their own boxes and of course out of my own as well.
Raising a child in Japan is not cheap. Twice yearly airfare to visit American grandparents, juku (not all children do well on their own ), lessons, etc. all add up.
We saved for university tuition, but transport, food, computers, phones…all added up…to double the tuition cost..and that was with child living at home.
Whatever you think it will cost..it will be more.
“…study abroad … which can also be extremely expensive.”
There are some tricks. First, go to a national uni and get good grades. Apply to their official exchange school(s) and when accepted, go.
For the year our kid was abroad on this scheme, we continued paying tuition to her school here–the same, usual per term cost. The dorm there (UBC) was cheaper than her housing here, and even with the flight, I think it was cheaper than if she’d stayed in Japan for that year. The downside was that as a science major, not all credits transferred, so she had to do an extra year (which then made her final year easy–thesis and another course or two–so she worked a lot).
**
Hidden in the reading above: university can be cheap here, given the right conditions. E.g., if a student goes to a public school and lives at home.