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With the cost of basics rising so quickly, it may seem like a good idea to consider covering the cost of luxuries with a second passive income.

Wouldn’t it be nice to put what we can each month into a stocks and shares ISA to achieve this goal? In reality, it’s unlikely to be a huge amount for most of us. Those who can afford luxury accommodation are unlikely to be interested in my ideas anyway.

There is an added bonus. If you can save enough investment money to pay for your annual summer vacation in a reasonable number of years… wouldn’t that be an incentive to then plan to cover the costs of another regular item? Then another. Keep it up, and you may retire sooner than you think.

What is the cost?

In 2024, A.J Legal and general (LSE:LGEN) The survey found that British families budgeted an average of £2,005 for holidays that year. This seems a bit low to me, and many people certainly spend much more than that. But we’ll go with that.

However, I need to adjust for inflation. I calculate that is equivalent to £2,178 today. What you get depends on the inflation numbers you choose, and the monthly number you follow. But I think that’s close enough.

Since the Legal and Public Affairs Department conducted the survey, here’s something interesting…

Invest for later

“Money makes money. And money makes money, makes money.”

—Benjamin Franklin, wrote about the synthesis in 1748

What if, instead of spending £2,178 on holiday, an investor bought Legal & General shares with him in his ISA every year? The company expects a dividend yield of 8.2% this year.

With that reinvested until it doubles, after nine years, there could be enough in the pot for future earnings to cover holiday costs every year from now on!

Well, we’d really need to increase our investment amount each year to keep up with inflation – but we’d have to do the same holiday shopping anyway. And we’ll need dividends to keep paying them – ideally also to grow with inflation. Nothing is guaranteed.

But I think this shows what kind of thing can realistically be achieved from investing in the stock market without having to be super rich.

Need more baskets

Putting all our money into just one stock would be problematic, especially since Legal & General’s share price has fallen 5% in the past five years. However, I think long-term investors should take it into consideration. And I really mean long term – at least a decade – because it’s in a very volatile sector.

But we need to diversify. Here are a few high-dividend stocks that are popular with investors looking for passive income.

Investors need to research each one and weigh the probabilities and risks. But this should be a passive income strategy worth considering, don’t you think?

Should you invest £5,000 in Legal & General Group Plc now?

When investment expert Mark Rogers and his team have stock advice, they can listen. After all, the leading Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

Right now, Mark believes there are 6 hot stocks that investors should consider buying. Want to know if Legal & General Group Plc has made the list?

Alan Oscroft holds no positions in the companies mentioned.