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Planning summer vacation? It's a great way to teach kids the basics of investment

Vacations are also not one-time in nature. In addition to the above, a family vacation is intangible in nature which is why it is difficult to treat it as an investment. However

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Travel or family vacations are generally not a family's largest expense when compared to buying fixed assets like a house or a car. They are not as frequent as household expenses either. Vacations are also not one-time in nature. In addition to the above, a family vacation is intangible in nature which is why it is difficult to treat it as an investment. However, a family holiday is not only an investment of money but also emotions and experiences.
Having discussed the merits of a family vacation, let us understand how we can fund the perfect family holiday. Below are five ways by which a family can save for a family vacation and enjoy beautiful experiences.

Create a Budget

One must have an estimate of what the outflow will be and what exactly is affordable. Once the family has decided on the holiday destination, cost associated with the holiday should be determined. Different modes of transport should be considered, which would help the family members strike a balance between cost and convenience. Next, things like accommodation, sightseeing and food should be discussed. Some amount should also be included for unaccounted emergencies, considering that one is travelling with children. Certain things like the time of the year for when the holiday is planned can have a huge impact on the trip budget. For example, travelling to popular destinations is always more expensive in the peak season when compared to the off season. Another thing to take into consideration would be the weather. If it is cold, then additional money should be earmarked for warm clothing. Once all these factors have been considered, a holiday budget is drawn up.

Set up a dedicated fund

After drawing up a vacation budget, the next step would be to determine the funding for the same. Infact, this is the crux of planning a great family vacation. Since it is not a regular expenditure, it is imperative that savings for the holiday start in advance. Each month, a certain sum of money should be set aside, in a disciplined manner, based on the previously estimated budget. Instead of simply parking the money in a savings bank account, it would be better to invest the money in short-term instruments which provide a relatively better return. If one is looking to invest a large amount of money upfront, then liquid funds and ultra-short term funds are a good option. These are relatively safe and have a potential to provide good returns. At the onset of savings for the vacation which is a year or two away, one can allocate a small portion to equity-equity related funds. If the vacation is not so far in future, investment can also be made through monthly income plans (MIPs) which have a portion of the fund allocated to equity investments.

It should be a team effort

Involve the children in the planning and saving phase. Encourage them to read up on the places that are a part of the holiday itinerary. Give the children some responsibility related to the trip. This could range from making a list of places to visit, to saving up their pocket money, to purchasing a memento from the trip. Also use this opportunity to teach your children about different currencies and their value.

Set up mini goals

Sometimes the whole idea of saving up for a big family vacation can seem daunting and unachievable. As a matter of fact, that is a reason why many people indefinitely postpone taking a vacation with their family. To help combat this problem, instead of just viewing the vacation as one big goal, family members can break up the holiday into a few mini goals. Some goals can be for the adults to achieve and some goals can be for the children to achieve. This strategy has many benefits. First and foremost it makes the bigger goal of taking a family vacation seem achievable. Secondly, it makes the children feel more involved and teaches them a sense of responsibility.

Plan ahead

A family vacation, especially one which is being taken with children should be planned in advance. They are multitude things that need to be considered, discussed and decided. Also planning in advance has the added advantage of creating opportunities to save on costs by availing early bird discounts and deals.
Adhering to the above five tenets will ensure that you are able to afford a fulfilling holiday with your family and return home with some amazing memories and experiences.

The writer is a fund manager, BNP Paribas MF

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