How to save for your vacations


If you see their passports, Chandini Bakshi and her husband Tarang Vasisth come across as typical millennials who earn well and spend fast. In the past 18 months, the Delhi-based couple have taken five vacations, including a five-day sojourn in Bali and a 10-day holiday in Europe.

But unlike many other millennials, Bakshi and Vasisth don’t swipe plastic or rack up loans to fund their getaways. Instead, they put aside Rs 12,000-15,000 every month into a liquid fund for their travel. “We see our vacations as short-term goals and start planning for them well ahead of time,” says Bakshi.

The couple represents a small but growing section of millennials who save and spend rather than accumulate debt to fund their desires. For many millennials, traveling is more important than other financial goals such as buying a car, saving for a house or even investing for retirement. Take Delhi-based Shikha Upadhyay. She has created a separate travel fund for her holidaying and puts Rs 10,000 in it every month. “This systematic saving has enabled me to fund my holidays without depleting my regular savings,” she says.

Building a separate fund for travel can be beneficial in several ways. Last October, Vasisth received an alert from a travel portal about an ongoing sale of travel packages. It was a good opportunity to book a trip to Udaipur for their wedding anniversary in December. Since they had saved enough in the travel fund, he sealed a deal without having to use plastic or dip into their savings. With an adequate pool of money at your disposal, you can clinch a good deal, instead of racking up debt or making a costlier last minute booking.

Where to save
Where should you put the money when saving for your travel plans? Leaving the money in your savings account is an option because it gives you instant access. But this also means the money might get used for other expenses. You need to put it away where it is out of sight, yet accessible at short notice. Since the goal is very short-term (usually 6-12 months), the returns don’t really matter. To build up their travel fund, Bakshi put away Rs 3 lakh in a fixed deposit three months ago. The interest is a piffling 6.25% and tax will reduce it further. The objective is not to earn high returns but to keep the money aside for a specific purpose.

You can also consider liquid funds, short-term debt funds and even a recurring deposit in your bank. “Ultra short-term debt funds are ideal since there is no exit load. Also, the investments are subject to low volatility, making it suitable for short-term needs,”

Budgeting for travel
Budgeting for travel is not as daunting as it sounds. Cutting back on avoidable expenses to facilitate regular savings and doing a bit of groundwork to capitalise on the plethora of deals on offer can help you tick destinations off your bucket list without burning a hole in your wallet.

Upadhyay believes in budget travel and takes off on short trips without much forethought. But for longer trips, she starts planning 3-4 months in advance. This lets her get money-saving deals. “I managed to snag a Delhi to Bangkok round trip for Rs 15,000 three months before my Thailand trip. The flight fares later soared to around Rs 30,000,” she says.

Another money-saving strategy is to do some research on hotel bookings. Conveyance and hotel bookings account for the largest chunk of travel budgets. So it pays to be on the lookout well before your travel date, to seize the best deals.

Bakshi and Vasisth learned this the hard way. They ended up overspending on their Bali trip in December 2016, due to lack of planning. “Bali was a learning experience and thereafter we decided to create a travel fund we can use for advance bookings,” Bakshi says. She adds that they have cut down on some discretionary spending to save more for their travel. “We are planning a holiday in Dubai this year. Next year, it may be Istanbul,” she says.

Credit: Economic Times

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