Taking the plunge to start a family in Japan is arguably one of the biggest decisions to make in life. In some cases this decision is made for you, and by surprise. Alongside the joy and excitement of creating a new life comes a host of anxieties about the newfound responsibility. Often the uncertainty surrounding the fiscal responsibilities associated with starting a family can be among the most intimidating. Here are some key points to consider when preparing your finances for your new family.
If you do not already have a healthy sized emergency fund, begin cutting all unnecessary costs and luxuries from your day-to-day life to start saving now. All reasoning behind maintaining a sufficient cash buffer to absorb unexpected costs is now greatly amplified. The unpredictability of life as an international professional tends to necessitate an emergency fund slightly larger than your friends back home, and this is amplified further still as an international family will experience unexpected one-off costs with even greater frequency, and often at a much higher price.
Studies have shown that children, on average, cost approximately $2,000 per month, per child (with daughters typically costing more) in the long run. This is, of course, not inclusive of potential private schooling or university fees. While the expenses will not be a predictable straight line monthly cost, the first year of your first baby’s life will tend to necessitate a large number of one-off fees, particularly in preparation of the new arrival (outfitting the baby room, stroller, baby bags, new camera…). Thankfully, friends and family are often more than happy to chip in to help build out your baby goods arsenal, but it would be wise to plan your baby budget conservatively. In fact, the most noticeable “expense” associated with starting a new family is simply the loss of income if a previously working mother takes time off during pregnancy or if one of the parents stays home with the baby to shoulder the noble responsibility of homemaker. Replacing this lost income can be a daunting task, or will necessitate decreased discretionary spending for the household.
Cost of Child Birth In Japan
Like most things in Japan, giving birth is not an inexpensive exercise to go through. Start to finish, you can expect over a dozen prenatal checkups averaging 5-7,000 JPY per visit. The cost of hospital birth in Japan will average between 500-700,000 JPY. Having a private room will cost extra, an epidural will cost approximately 100,000 JPY, and if you give birth outside of normal hospital hours they will typically add an additional fee as well. However, the good news is that due to the decreasing population in Japan, the government is happy to assist in picking up the tab. At present, the allowance for giving birth in Japan is 420,000 JPY per child from the federal government. Your local city may provide a stipend as well, for example Minato-ku offers a 180,000 JPY additional stipend per child.
Financial Benefits of Starting a Family
To add some encouragement alongside the above omens of increased expenditure, there are certainly some financial benefits to starting a family. First of all, it is in the government’s best interest for the general populace to continue reproducing, and accordingly they become more lenient with you on tax-day should you decide to settle down and start a family. Although in 2016 deductions for dependents was reduced by 50,000 JPY, you will still be able to deduct 330,000 JPY per dependent per year from your taxable income. This will reduce both your federal, local, and municipal tax bill, as well as potentially reduce your health insurance and pension premiums. In addition to this, the Japanese government will also give you a monthly per-child stipend to assist with costs. At present, the stipend is 15,000 JPY per month for each child under the age of 3. After turning 3, the government will provide 10,000 JPY per month for up to two children. If you plan on having a large family, the stipend after age 3 increases to 15,000 JPY per month for the 3rd and each subsequent child until junior high school. Upon entering junior high, the allowance drops to 10,000 JPY per month. However, if you are receiving a salary above a certain threshold, depending on how many children you have you may be ineligible for the above stipend, and will instead receive 5,000 JPY per month per child. Please see below table illustrating the thresholds:
|Number of dependents||Net income|
Depending on which city you live in, there could be tax benefits or special allowances in addition to the above that are unique to your individual locality. A quick trip down to your local city hall or ward office is the fastest way to get confirmation on what is available in your residence in the current year.
Check your health insurance coverage
Of course, a key component of starting a family is making sure that your dependents are covered by whichever health insurance plan you currently are a part of. If you are enrolled in the standard Japan National Health Insurance through your company, chances are this will simply involve a conversation with your boss or HR department to make sure that monthly deductions from your salary are taking into account any changes to your family structure and your increased number of dependents. If you are on a private health insurance plan, perhaps through an international company, this many require establishing a new family-oriented health insurance plan; or at the very least checking to make sure your current plan already covers family members.
Establish comprehensive life insurance protection
Now that your life has experienced a substantial upgrade, you are directly responsible for the livelihoods and well-being of others. This leaves the impending question: if something were to happen to me, in what state would this leave them? We have written extensively on the topic of life insurance, so we will simply reiterate the overall theme, that we have yet to come across anyone that was unhappy with the decision to establish a life insurance plan that ensures their loved ones are able to continue a similar quality of life if they were taken out of the picture.
Paid or Unpaid Leave For Birth In Japan
Last to consider in planning for the financial impact of starting a family are the decisions regarding how to spend your time immediately before and after the planned birth date. Depending on your current situation with your employer, as well as your spouse’s, you could have some flexibility with regard to taking leave after the birth of your child. It is important to get all the facts from your employer as to how long their policy is for employees taking time off, and if they pay full or partial salary, if at all. After talking it over with your spouse regarding who takes off, or if both of you take off, and for how long. This could require additional savings to make up for lost salary if it is not fully compensated by your employer. At the moment, the Japan law regarding maternity leave mandates that mothers can take off up to 6 weeks prior to giving birth, and 8 weeks after; and are entitled to receive two thirds of their salary. In order to receive this benefit, you will need to have been already paying into the social insurance system for at least two years.
– William S. Comanor, Mark Sarro, R. Mark Rogers , (2015), The Monetary Cost of Raising Children, in James Langenfeld (ed.) Economic and Legal Issues in Competition, Intellectual Property, Bankruptcy, and the Cost of Raising Children (Research in Law and Economics, Volume 27)
– Investing in Children: Changes in Parental Spending on Children, 1972–2007 – Sabino Kornrich, Demography, Volume 50, Issue 1, pp 1–23