Tag: Financial Wellness

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Wellness

Educational Costs, impacting life choices

A 2021 survey (1) found that both public and private education costs had reached new highs. The cost of 15 years of private education was 3.2 times the cost of public education.

Study costs, 15 years from Kindergarten through High School¥ m
Public only5.7
Private kindergarten, Public thereafter6.2
Private kindergarten and High school, Public at other times7.8
Private only18.4

Source: Ministry of Education, Culture, sports, Science, and Technology

In addition to the difference in classroom tuition costs, other normal school related costs (excursions and field trips, extracurricular activities, textbooks and supplies, commuting costs) are higher at private schools. (2)

However, the relative cost is markedly highest at elementary schools.

 PublicPrivateMultiple
Kindergarten¥165,126¥308,9091.9x
Elementary¥352,566¥1,666,9494.7x
Junior high¥538,799¥1,436,3532.7x
High school¥512,971¥1,054,4442.1x

In the case of private elementary schools, the cost of supplementary study expenses is notably higher, approximately ¥663,000 a year versus ¥245,000 a year. (1) The probable additional service being provided is keeping the children at the school for three hours or so after the end of normal classes. This targets the “First-Grade Wall” (3) which relates to children advancing from kindergarten to elementary school at age 6.

Kindergarten3 yearsAge 3-5Optional
Elementary school6 yearsAge 6-11Compulsory
Junior high school3 yearsAge12-14Compulsory
High school3 yearsAge 15-17Optional

Public elementary schools send children home mid-afternoon. Parents are then responsible for their safety. Choices include one spouse changing from full-time to part-time work, everyday private lessons, or sports activities outside school, or finding regular after-school care.

The private school option is an expensive one.

Financial planning needs to start as early as possible.

References:

  1. Public and Private education Costs in Japan Soar to New Highs, Nippon.com, January 11, 2023
  2. Private School Costs triple Public Education Level Through High School, Nippon.com, October 4, 2018
  3. First-Grade Wall: Elementary School Places New Burdens on Working Parents, Nippon.com, January 4, 2023
Categories
Wellness

Japan and Financial Literacy

A survey by the BOJ (1) found low levels of financial education (just 6.6%), and low financial literacy, as defined by the BOJ (20.9%). At the same time, Japanese households were found to be highly conservative, below.

It is unclear whether low financial literacy leads to conservative household financial management, or that the latter has diminshed the urge to pursue the former.

The survey results indicate Japanese households are overwhelmingly prudent in paying their bills on time (spread score of +80.3, table below), more think long term (spread +30.9), whilst few live short-term (spread -37.4), and very few have too much debt (spread -62.5).

Risk aversion is further evidenced by the negative spread on those prepared to risk losses when investing.

“Spread” below is the percentage of survey respondents that answered strongly agree or agree, minus those that answered disagree or strongly disagree.

Spread
+80.3 – I pay my bills on time
+30.9 – I set long term financial goals and strive to achieve them
-37.4 – I tend to live for today and let tomorrow take care of itself
-62.5 – I have too much debt right now
-13.3 – I am prepared to risk some of my own money when saving or making an investment

For more data on financial literacy in Japan, please follow the link here.

References:

  1. Financial Literacy Survey: 2016 Results, Bank of Japan, October 2016
Categories
Wellness

Kakeibo & Financial Wellness

Kakeibo, a household accounting book, and the practice of recording and monitoring income and expenditures in a physical notebook, traces its origins in Japan to 1904, and to Hani Motoko, its inventor. The kakeibo method forces one to think about one’s needs, spending and motivations, leading to an increased ability to save. (1, 2, 3)

Financial Wellness

The fundamental difference with existing personal financial planning is that “Financial Wellness” does not begin with money, but with an understanding of Wellness and the associated attainment of longevity and the 100-year life.

Without having wellness at one’s core, money worries can flood in. Surveys usually find money to be the number one cause of stress. With wellness the core focus, money becomes a facilitator, in fact just one of many facilitators. Fortunately, a wellness regime only requires a modest amount of money

Financial Wellness & Savings

In an environment of the 100-year life, we postulate that after education, people will be working from age 25 to 80 followed by 20 years of leisure.

Whilst working, we recommend saving 20% of one’s after-tax income.

In contrast to the conventional study-work-retire cycle, the new typical life will include one or two career reinventions involving changing industries (as well as working for multiple different companies during each career phase). Career reinventions will involve perhaps 1-3 years of retraining, repositioning.

To facilitate the above financial resources are needed not just for the 20 years after the age of 80, but also during the career reinvention periods.

For more, please see the 17-page Financial Wellness paper here.

References.

  1. CNBC: I tried ‘Kakeibo’: The Japanese art of saving money—and it completely changed how I spend my money, by Sarah Harvey, published January 2020
  2. Credit.com, Kakeibo: The Mindful Japanese Budgeting System, published August 2021
  3. Japan Times: Kakeibo: Turning a dull aspect of Japanese life into social media gold, published January 2020