Saving for Vacation

[22201save]

Our family takes a big vacation every two years. We spend a bunch of money to go overseas for about 6 weeks. I know this is not very Mustachian, but we do it so that my wife can see her family and our kids can experience their second culture. My question is: How should we save for this expense? Over the last couple of years we have just saved up the money in an online savings account that pays a little interest. We also keep our emergency fund in the same account (about $10,000). Now that I am reading more about Mustachian methods, putting this money in this account for over a year and a half seems inefficient. I am thinking we should instead put the money towards paying down our mortgage and then save like hell for the 6 months before our vacation. Do you have any advice for us?

[Prepube]

I would put the whole thing on my credit card and not worry about it.

j/k, of course.  Need more info about your situation.  If you are taking a big vacation while not reaching your other financial goals, forget the vacation this year.  Otherwise, if you want fruitful responses from the many personal finance geniuses here on this forum, you must give lots more info. 

[deborah]

Depends. Do you have an emergency account? Maybe put this somewhere less accessible and and make your vacation savings the emergency account for a year and a half, and move the emergency money to somewhere more accessible at that point. Put vacation money into term deposits that have more interest than online savings.

Here, most people have mortgage offset accounts, and adding the money for your vacation into that would be the best place for it.

[chicagomeg]

Unless you're spending 10's of thousands of dollars on it, you're going to be optimizing things to get only a little bit of extra benefit. For example, if your mortgage is at 4% and your savings account pays 1%, and your vacation costs $7,500, you would save $225 by putting the money towards your mortgage for a year instead of in your savings account.

[22201save]

Thanks for the advice. I am going to investigate mortgage offset accounts. I'm also going to apply for a home equity line of credit and keep that as our primary emergency fund rather than cash. Thanks again.

[hdatontodo]

How about making it every 3 or 4 years. It seems a bit extravagant to me.

What is the cost of not working those 6 weeks? If nonzero, make a mental note to add that to the cost of the trip.

[Thegoblinchief]

The most efficient way would be to read up on travel hacking. You could probably get the most expensive parts of the trip (the flight and any hotels) for free or greatly reduced, just by putting your normal spending on the right set of rewards cards.

I don't do this myself but there are lots of resources around about it.

[rugorak]

The most efficient way would be to read up on travel hacking. You could probably get the most expensive parts of the trip (the flight and any hotels) for free or greatly reduced, just by putting your normal spending on the right set of rewards cards.

I don't do this myself but there are lots of resources around about it.

I'd second this.

How about making it every 3 or 4 years. It seems a bit extravagant to me.

I would disagree with this. Since you are visiting family I think most people would understand there is more than just money involved here. How many people would tell MMM he is extravagant for going to Canada every year to visit family? And you are going every other year. Overall your time frame is 2 years. 2 years is too short for much else besides savings. So your idea of splitting between mortgage and trip sounds the most reasonable to me. Otherwise you risk not being able to see the family just for chasing slightly better returns. Not worth it in my opinion. Just try and cut the costs of the trip itself. You have family there who can hopefully give you a bit of help with travel hacking.

[retired?]

Agree not much to optimize your savings approach over such a short period.  I'd probably just focus on optimizing the trip cost, which could easily be worth much more.  Get all the discounts you can.

How would you pay for it if you didn't specifically save for it (i.e. instead invested in riskier or longer-term than cash or mortgage paydown)?

Do use CC's and take reward and pay off.

Just make sure your are maximizing 401k, IRA, etc, which are, annually, use it or lose it benefit.