How much would someone need from an ISA to cover a second monthly salary of £1,000?

Earning dividends on shares of proven blue-chip businesses is a common way to try to earn extra money. If done correctly, it can provide many secondary benefits in the long run.

How much of an ISA would one need to set aside a four-figure monthly income in this way?

The economics here are simple

The amount required will depend on the ISA’s dividend yield rate. The yield is basically the amount an investment earns every year in dividends, expressed as a percentage of the amount paid for it.

Since investors pay different amounts even for the same share over time, different investors often do not get the same yield even for the same share.

£1k a month adds up to £12k a year. To keep things simple for illustration purposes, assume the yield is 10%. That would mean the ISA needs £120k to produce the second target income.

In practice, blue-chip stocks rarely offer such yields. For now, the flagship FTSE 100 An index of income stocks yields 3%.

However, that is only an estimate. I think high yield is a reality in today’s market even if we stick to a diverse selection of high-quality businesses.

I think 6% is achievable; that would mean the ISA needs £200k in it to meet the second income target.

Building an ISA over time

That’s 10 times the most people’s annual ISA allowance.

Does it need ten years of savings then? Not so, even for a beginner.

By investing £20k a year and compounding (repatriating) dividends, the ISA should be worth £200k after nine years.

Building an ISA portfolio the right way

I’ve already mentioned diversification: that’s a simple but important way to manage risk which means don’t put all your eggs in one basket.

An investor can make some smart moves when it comes to managing their Shares and ISA Shares, from comparing providers – choosing the one that seems best for their personal needs – carefully examining the future benefits of the company, not just looking at its history. Shares are not guaranteed to last.

Here is a budget to consider

One dividend stock that I think is worth investors considering right now FTSE 250 it is strong MONEY (LSE: MONY), owner of businesses including Money Supermarket.

Fears that AI could eat into customers’ use of the price comparison website explain why its share price has fallen 23% in the past year.

I think the danger of AI is real. But I also think that MONY can navigate it, emphasizing its deep knowledge, focus on specific financial products, and the ability to offer complex products in a way that currently at least AI tools will find it difficult to do.

The business is proven and very profitable. That helps support a generous dividend. The dividend yield now stands at 8.1%.

The next few years promise to be challenging for the company as AI begins to play a more important role in financial service cost comparisons.

But I think MONY can play to its strengths, continue to dump capital, and hopefully deliver big gains.