A vacation is essential for a family to grow together. It strengthens the relationships, relieves work pressure and stress, and provides health benefits too. Going on a vacation is as important as spending money on a child’s education as it is one of the family goals.  

You have to fund a vacation, especially if it is a dream vacation, and it demands systematic planning and saving money without disturbing your routine finances. The best way to do is to allocate payment every month from your capital. You can also look for short investment schemes that fetch good returns. 

Short term investment plans: There are a few short term investment plans in which you can invest money regularly. A fixed deposit (FD) in a bank is one of the options to put in cash for a short and long term. Presently, banks offer an interest rate that ranges from 4 – 8 percent according to the term you invest. 

It is essential to understand that premature withdrawal can end up in reducing the interest dividend. Next option is recurring deposit (RD). You start to endow a fixed amount every month in a bank. The other factors, like interest rates, withdrawal procedure, are more or less similar to that of an FD. 

Corporate FDs are similar to the bank FD; however, the interest may vary from 1-2 percent, and it allows early withdrawal at the company’s discretion. Banks also offer a savings account that earns high interest. 

The interest rate is the same as FDs, and the only benefit is that there is no lock-in period. Premium insurance plans are also available, and the dividend from the invested money is all taxable. A personal loan is yet another option, but it carries high-interest rates. 

Investing in mutual funds:  Choosing a mutual fund investment is an ideal way to spend an exotic vacation. SIP takes you to a better and simplified route of investing money in a short term mutual funds. SIP produce sufficient capital to fund your holiday without getting into debt. To start with, you have to decide on the place of vacation. 

Then ascertain the budget required for the trip. Then, you have to determine the time horizon for the journey. The duration has to be 2-3 years; hence, your trip would be sufficiently funded. After this, you can settle on investing in mutual funds to yield ample returns to fund your vacation. 

Understanding the types of mutual funds: Investing in mutual funds for a longer duration, say more than five years offers higher returns. There are also short term plans that usually take the SIP route. Liquid mutual funds earn profits around 6 -7.5% that is of low-risk for a shorter duration. 

Short duration funds are appropriate investments for up to three years, and they generate returns around 8% over the tenure. Ultra-short duration funds are ideal for tenure for less than one year, and it gives out gains of around 7% per year. Balanced advantaged funds proffer returns up to 9% for three years and possess lower risks moderately. 

After building a suitable vacation corpus through mutual equity funds, you can activate STP (Systematic Transfer Plan) to lower the market risk of your assortment. STP transfers a fixed amount to your ultra-short duration debt fund at recurrent intervals.

So, investing in mutual funds, mainly through SIP, is the best option to go on for your dream vacation. It is also essential to keep on your investments in sync with your goals as it provides a better knowledge of how much to save.