With the cost of necessities rising so quickly, thinking about covering the cost of second-hand luxuries with passive income may seem like a good idea.

Wouldn’t it be good to put aside as much as we can into a stocks and shares ISA each month to lend a hand achieve this goal? This is unlikely to be a huge amount for most of us. And those who can afford high-end luxury stays are unlikely to be interested in my ideas anyway.

There is an added bonus. If you can save enough investment cash to pay for your annual summer break in a reasonable number of years… isn’t that an incentive to plan to cover the cost of another regular item? And then another one. Keep it up and you could retire sooner than you think.

How much is it?

In 2024 A Legal and general The (LSE: LGEN) study found that British families have spent an average of £2,005 on holidays this year. This seems a bit low to me, and many certainly spend much more. But we’ll go with it.

However, I have to take inflation into account. I calculate that this is the equivalent of £2,178 today. What you get depends on whose inflation data you choose and what monthly amount you choose. But I think it’s close enough.

And considering that the survey was conducted by Legal & General, here’s the engaging thing…

Invest for later

“Money makes money. And money that makes money makes money.“

—Benjamin Franklin, writing about folding in 1748

What if, instead of spending £2,178 on a holiday, an investor bought Legal & General shares in an ISA every year? The company forecasts a dividend rate of 8.2% for this year.

If you reinvest this sum after nine years in the pot, there could be enough for future dividends to cover the cost of your holiday each year!

Well, we’d really have to boost the investment amount every year to keep up with inflation – but we’d still have to take the same shopping holidays. To continue paying dividends, we would need dividends – ideally also rising with inflation. Nothing is guaranteed.

But I think it shows what you can realistically achieve by investing in the stock market without having to be super prosperous.

You need more baskets

Putting all our cash into just one stock would be asking for trouble, especially considering the Legal & General share price has fallen 5% over the last five years. However, I believe this is an option that long-term investors should consider. And I really mean long term – at least a decade – because it’s a sector with a lot of ups and downs.

However, we need to diversify. Here are some other high dividend stocks that are popular with investors looking for passive income.

Investors need to look at each of them and weigh the opportunities and risks. But this has to be a passive income strategy worth considering, don’t you think?

Is it worth investing £5,000 in Legal & General Group Plc now?

If investing expert Mark Rogers and his team have stock advice, it can pay to listen. After all, Twelfth’s flagship Magpie Share Advisor newsletter has been running for almost a decade, providing thousands of paying members with the best share recommendations from across the UK and US markets.

Mark believes there are 6 standout stocks that investors should consider buying right now. Want to check if Legal & General Group Plc is on the list?

Alan Oscroft does not hold any position in the companies mentioned.