Hello! Today, I’d like to share insights from my experience as an “extreme investor” with a portfolio achieving a 9.66% annual return. This article explores the concept of using dividend income to cover education costs, drawing from real education expense data and incorporating my unique investment approach. Let’s dive into how dividends can become a powerful force to secure your family’s future.
1. How Much Are Education Costs? Comparing Public and Private Schools
Contents
- 1 1. How Much Are Education Costs? Comparing Public and Private Schools
- 2 2. Simulating Education Costs with Dividend Income
- 3 3. The Potential of Dividend Income from an “Extreme Investor’s” Perspective
- 4 4. Challenges Ahead and Suggestions
- 5 Conclusion: Dividends as the Foundation for Family Security
- 6 References
To understand the potential burden of education costs, let’s look at the data from the Japanese Ministry of Education’s 2021 Child Learning Cost Survey.
| Education Stage | Public Total Cost (JPY) | Private Total Cost (JPY) | Difference (JPY) |
|---|---|---|---|
| Elementary School | ¥1,932,000 | ¥10,050,000 | ¥8,118,000 |
| Middle School | ¥1,467,000 | ¥4,206,000 | ¥2,739,000 |
| High School | ¥1,539,000 | ¥3,201,000 | ¥1,662,000 |
| University (Liberal Arts) | ¥0 | ¥5,580,000 | ¥5,580,000 |
| Total | ¥4,938,000 | ¥23,037,000 | ¥18,099,000 |
Summary of Costs
- Full Public Track: Approximately ¥4,938,000 (about ¥274,000 annually)
- Full Private Track: Approximately ¥23,037,000 (about ¥1,280,000 annually)
- Public Elementary/Middle/High School + Private University: Approximately ¥10,518,000 (about ¥584,000 annually)
My Case Study
In my case, I followed a public high school to private university path, incurring education costs of ¥10,518,000 (¥584,000 annually). With my dividend income of ¥1.9 million annually, I can comfortably cover these expenses.
2. Simulating Education Costs with Dividend Income
With a portfolio generating a 9.66% annual return and an annual dividend income of ¥1.9 million, I simulated how much of the education costs can be covered.
Dividend Coverage Simulation
- Full Public Track (¥4,938,000)
- Annual Cost: ¥274,000
- Dividend Utilization: 14%
- Surplus Dividend: ¥1,626,000
- Full Private Track (¥23,037,000)
- Annual Cost: ¥1,280,000
- Dividend Utilization: 67%
- Surplus Dividend: ¥620,000
- Public + Private Mix (¥10,518,000)
- Annual Cost: ¥584,000
- Dividend Utilization: 31%
- Surplus Dividend: ¥1,316,000
These simulations illustrate how dividends can not only cover education costs but also leave significant surplus for reinvestment or other expenses.
3. The Potential of Dividend Income from an “Extreme Investor’s” Perspective
My investment strategy involves targeting high-dividend stocks across sectors, with calculated risk. This approach has proven to be a solid foundation for supporting my family.
Portfolio Breakdown and Strategy
- Investment Trusts: 55.2%
- Energy Sector: 13.9%
- Consumer Staples: 16.4%
- Financials: 9.2%
- Materials: 4.6%
- Others: 0.7%
I’ve focused on companies in the United States, Brazil, and the UK, with no Japanese stocks in my portfolio. Concentrating on energy and consumer staples sectors provides stable dividends, while investment trusts help diversify risk across various sectors.
Benefits of Dividend Income
- Covering Education Costs: With dividends funding education, I can allocate my salary to family living expenses and savings.
- Advancing Towards FIRE: By growing dividend income further (targeting ¥3 million annually), achieving semi-retirement (Side FIRE) becomes realistic.
- Teaching Financial Literacy: Part of my dividends is dedicated to teaching my child the value of money and investments.
4. Challenges Ahead and Suggestions
Challenges
- Growing Dividend Income: My goal is to increase annual dividends from ¥1.9 million to ¥3 million.
- Balancing Living Expenses: Ensuring that dividend income covers education and supports broader family needs.
- Financial Education for Children: Demonstrating the importance of assets and teaching money management from a young age.
Suggestions for Readers
If you’re intrigued by the idea of using dividends to support education or family finances, here’s how you can simulate your own plan:
- Calculate Education Costs
- Estimate total costs based on public/private school choices up to university.
- Review Current Investment Income
- Check your portfolio’s annual dividends and compare them to education costs.
- Plan to Fill the Gap
- Set a target dividend amount and consider reinvestment strategies to achieve it.
Conclusion: Dividends as the Foundation for Family Security
Through this simulation, I’ve realized how dividend income can cover education costs while providing financial security for my family. It’s not just about paying bills—it’s about creating a foundation for a better life and opening doors to opportunities like Side FIRE.
If you’re inspired by this idea, consider exploring dividend-focused investing as a way to support your family’s future. Let your investments work for you and create a legacy of financial independence and peace of mind for your loved ones.
References
- Ministry of Education, Culture, Sports, Science and Technology: "2021 Child Learning Cost Survey"
- Financial Services Agency: "Basics of Asset Management with NISA"
Explore these resources and start your own simulation to see how dividends can support your family’s future!