Saving for College - What is the Best Approach?

[captainspoke]

Just my bit of data. (are you sitting down?!? )

First kid went to nat'l uni in osaka, cost was about ¥2.7-2.8 million/yr (we don't live there). Add a cheaper year (there) in juku beforehand, since she didn't make it in the first time. A little over ¥2M for that. Probably ¥13M total.

Second went to public, but in tokyo (don't live there, either). Farther away, and more expensive--¥3.3M/yr. Plus an extra exchange year abroad, which was a little cheaper than tokyo. Probably ¥15-16M total.

That's everything we funded--school expenses, housing, trips home, basic spending money. The both worked, for extra spending money and then any trips they wanted to take. In each case it could have been done for less, but it could have been done for more. We (and they) weren't cheap, but we weren't extravagant.

**
It was worth it. They graduated, and haven't asked for or needed money since. Older one (now 31) makes good money (chem major), her husband more, and her job is such that she's had two year-long maternity leaves (has returned to work twice now). Younger one went to the states, worked in a uni lab for 2.5 years (full time lab asst), and is now in a fully funded phd (one year done).

[Kanto]

Just my bit of data. (are you sitting down?!? )

First kid went to nat'l uni in osaka, cost was about ¥2.7-2.8 million/yr (we don't live there). Add a cheaper year (there) in juku beforehand, since she didn't make it in the first time. A little over ¥2M for that. Probably ¥13M total.

Second went to public, but in tokyo (don't live there, either). Farther away, and more expensive--¥3.3M/yr. Plus an extra exchange year abroad, which was a little cheaper than tokyo. Probably ¥15-16M total.

That's everything we funded--school expenses, housing, trips home, basic spending money. The both worked, for extra spending money and then any trips they wanted to take. In each case it could have been done for less, but it could have been done for more. We (and they) weren't cheap, but we weren't extravagant.

**
It was worth it. They graduated, and haven't asked for or needed money since. Older one (now 31) makes good money (chem major), her husband more, and her job is such that she's had two year-long maternity leaves (has returned to work twice now). Younger one went to the states, worked in a uni lab for 2.5 years (full time lab asst), and is now in a fully funded phd (one year done).

This sort of insight definatly helps! Thank you.

I will be maxing out the J-Nisa, and continuing to invest as much of our income as I can.

These figures seem high, I am going to have to rely on the magic of compound interest!

[captainspoke]

There have been a couple mentions of gift tax. Generally, I don't think this is a concern/worry. I'm not sure how to phrase it, but as parents you are providing natural, normal support for your child--support that (links above) is widely practiced and taken for granted.

I suppose there could be some kind of transfer of money to an 18-23yr old child that would trigger a look by the tax office, but as long as you're on par with the normal cost of an education--even an expensive one--I doubt the tax people would ever even be interested.

Also, not all of the money involved plops into the child's bank account. I transferred money directly to a designated account for tuition payments (first); second was an auto-deduction by the school from one of my accounts. I can't remember how we did it for our first, but for the second I made direct transfers to the landlords along the way.

[Kanto]

There have been a couple mentions of gift tax. Generally, I don't think this is a concern/worry. I'm not sure how to phrase it, but as parents you are providing natural, normal support for your child--support that (links above) is widely practiced and taken for granted.

I suppose there could be some kind of transfer of money to an 18-23yr old child that would trigger a look by the tax office, but as long as you're on par with the normal cost of an education--even an expensive one--I doubt the tax people would ever even be interested.

Also, not all of the money involved plops into the child's bank account. I transferred money directly to a designated account for tuition payments (first); second was an auto-deduction by the school from one of my accounts. I can't remember how we did it for our first, but for the second I made direct transfers to the landlords along the way.

The gift tax is only a real concern for the J-Nisa as far as I know. Money moves from 1. Your account -> 2. Their Bank Account ->3 Their Securities Account -> 4. Their J-NIsa Account -> 5 Their J-Nisa Fund.

It might also be an issue if you invest in "Their" taxable account.

Perhaps someone might explain why that would be a good option? Would funds in a childs taxable account be taxed at a much lower rate? That is my assumption.

I see why the J-Nisa was discontinued. It is incredibly convoluted. It seems very very few people use it. Or even are aware of it.

[Chibalass]

Just my bit of data. (are you sitting down?!? )

First kid went to nat'l uni in osaka, cost was about ¥2.7-2.8 million/yr (we don't live there). Add a cheaper year (there) in juku beforehand, since she didn't make it in the first time. A little over ¥2M for that. Probably ¥13M total.

Second went to public, but in tokyo (don't live there, either). Farther away, and more expensive--¥3.3M/yr. Plus an extra exchange year abroad, which was a little cheaper than tokyo. Probably ¥15-16M total.

That's everything we funded--school expenses, housing, trips home, basic spending money. The both worked, for extra spending money and then any trips they wanted to take. In each case it could have been done for less, but it could have been done for more. We (and they) weren't cheap, but we weren't extravagant.

**
It was worth it. They graduated, and haven't asked for or needed money since. Older one (now 31) makes good money (chem major), her husband more, and her job is such that she's had two year-long maternity leaves (has returned to work twice now). Younger one went to the states, worked in a uni lab for 2.5 years (full time lab asst), and is now in a fully funded phd (one year done).

Thanks for your honesty about the costs overall - the totals including juku are on the high side and the extra things like living away from the home city did seem to add a lot to your total there.
So about 30million total for the two of them, but they could graduate debt-free.
My oldest is still in elementary, so looking ahead helps a lot.

[captainspoke]

...
Thanks for your honesty about the costs overall - the totals including juku are on the high side and the extra things like living away from the home city did seem to add a lot to your total there.
So about 30million total for the two of them, but they could graduate debt-free.
My oldest is still in elementary, so looking ahead helps a lot.

The one spent a year re-prepping for the exams, sure, but on the plus side, neither one went to juku in HS or middle, so that was not on the expense list then.

[Chibalass]

That's really helpful, thanks.
I suspect that the extra year really working hard to get into a good place may be better spent instead of all the drip-drip juku costs.
I'm hearing high numbers for juku that mean millions of yen, but worse than that, it's the summer holidays and free time that seems to be eaten up by that travel. I've told the kids we can have a holiday to Okinawa/Europe once a year, and great holidays in Japan (except this year of course) with the money saved.
I'm resisting juku at the moment, and I'll see how that works out later.

[AreTheyTheLemmings?]

It was worth it. They graduated, and haven't asked for or needed money since. Older one (now 31) makes good money (chem major), her husband more, and her job is such that she's had two year-long maternity leaves (has returned to work twice now). Younger one went to the states, worked in a uni lab for 2.5 years (full time lab asst), and is now in a fully funded phd (one year done).

neither one went to juku in HS or middle.

There's a lesson in there somewhere...

[Bubblegun]

So glad I stumbled on this thread.
We took out a vanguard account when our son was younger, about 15 ,16 years ago and we dropped 10,000 yen a month into that, and another account at the japanese post office, which the wife wanted just in case.( not sure on how much). Sadly it was before all the NISA stuff.
But as he’s gotten older we’ve had a weee rethink and I’m not sure how my thinking goes.

Anyway if we cash in all the money to pay for uni, we would have lost 18 years of investment.(well he would). However, I though if the government allows him to borrow(not his cash) he can continued to drop in 10,000 yen for the rest of his life into his account (well we could) If he decided to drop out of uni.( for what ever reason) then he hasn’t blown all his money, and he’s take responsibility for his student loan.(which I think is pretty low on interest rates.
However if he does graduate, what a fantastic gift to completely clear all his debt. And start life debt free again.
But I suppose it does depends on the course. Studying history, or law in Japan May not give him the financial returns, whereas studying to be a nurse, teacher, engineer may produce better employment opportunities and I’d feel happier about that.

I’m not sure what the student loan interest rates are but if I can earn more on the investment e.g 6% and the student loan interest rate is say 2%.
Then I’m wondering if it’s better for us to take out the student loan?

This article says it’s about
The interest rate charged on Type 2 loans is negligible at 0.33% for the fixed interest rate option and 0.01% for the variable interest rate that is altered every 5 years (as of May 2017—see JASSO, 2017). Neither loan type is associated with fees.

Food for thought, and hopefully if the kids want to go to uni then we can cross that bridge.
At the moment he doesn’t know what he would like to do for a career, and I don’t want to pressure him at 18 “you must go to uni” and he chooses something just to go to uni cause it’s what everyone does. However, if he takes a couple of years out, realizes working sucks, and he wants to go to uni and invest in himself, then I’m all in.

Any thoughts on either paying upfront uni fees, paying the debt off after graduation (the article says the interest doesn’t start until after graduation) or just take out a straight loan and keep the investment going for another 20 odd years?
Does anyone have experience of their kids going to uni at an older age in Japan.was it easy or difficult?
I didn’t go to uni until I was 25, and it was the best choice for me.

[RetireJapan]

Any thoughts on either paying upfront uni fees, paying the debt off after graduation (the article says the interest doesn’t start until after graduation) or just take out a straight loan and keep the investment going for another 20 odd years?

My stepkids all took out loans and started paying them off when they started working. If necessary we'd have helped with the loans, but in the end it wasn't necessary and I think it is good for them to be aware of that expense and responsibility.