So: you’ve decided that you need to get away from it all. Exciting!
For some people, planning a vacation can be a process that takes years. For others, it’s ‘wheels up’ the day after they had a fleeting vision of sun and surf. Regardless of which brand of ‘vacationer’ you are, travelling requires money. So, here are some tips on how to budget for a vacation so you can fully embrace the holiday vibes. 💆
- Map out your costs (and plan for the unexpected)
- Break it down into a monthly savings goal
- Put your savings in a risk-free account
Map out your costs (and plan for the unexpected)
These days, pricing out your flights, hotels, tours, adventures, entertainment is a breeze. Take some time to take a look at each part of your journey and consider the costs. This will give you a starting idea of how much you will need to save.
Most vacations start off as a big picture, with the details coming later. We recommend overestimating your costs up front to leave a buffer between the big expenses you plan for, and all the extra expenses you might not think of in advance. Try to estimate placeholder numbers for as many line items as you can, including things like your daily food expenses, travel insurance, or sightseeing.
On top of being unlikely to find yourself short of cash, overestimating your expenses hopefully gives you a little extra in your travel fund to take advantage of any unplanned opportunity that surfaces along the way.
Break it down into a monthly savings goal
Let’s look at an example trip below. (We’re keeping things simple by using an all-inclusive resort in Mexico.)
- Family of 4
- Desired destination: Mexico
- Type of trip: All inclusive resort
- Length of trip: 10 days
- Desired date: two years from now
Total cost (with flights) = $10,000 CAD
Total cost with $2K buffer = $12,000 CAD
Savings goal per month = $500 per month ($12,000 divided by 24 months)
Put your savings in a risk-free account
Unless you are planning a vacation three or more years into the future, saving for a vacation is considered a short term savings goal. You should treat this as a savings goal rather than an investing opportunity.
When the vacation arrives, you want to ensure a predictable outcome. As boring as it sounds, methodically putting money into an interest bearing savings account (like a Save account) is your safest and surest path to well funded and successful trip.
Something to think about: the pros and cons of GICs
Guaranteed Investment Certificates (GIC’s) have long been held as the go-to risk free savings vehicle offered by traditional banks. They sometimes offer a better rate than a traditional savings account, but your money is locked in until the GIC ‘Maturity Date’ arrives.
When evaluating whether to use a GIC vs. a traditional savings account, you need to consider whether or not you’re getting more interest, and whether or not you want to have the flexibility to access your funds sooner than the Maturity Date. With a GIC, if you decide you want to travel sooner, you might pay a penalty or forgo in just to get access to your own savings.