Affording to Show Your Children the World

An easy savings plan for the average American family to afford five-figure dream vacations.

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Trent Hamm
Trent Hamm
My daughter has dreamed of going to Paris for as long as I can remember. In kindergarten, one of her major art projects involved a paper sculpture of the Eiffel Tower. She's watched "Ratatouille" more times than I can count. She also picks up various French phrases.

Nothing would make me happier than being able to take her on a family vacation to France for a week or two when she's a little older.

When I look at the airline prices, though, I balk. A round-trip ticket from Chicago to Paris is about $1,000. If five of us go, it's going to cost $5,000 just to get there. That doesn't include all the expenses involved with a family of five spending significant time in a foreign country.

Any realistic budget for this quickly jumps into the five figures to be on the safe side. For most families in the United States, that's a lot of money to come up with.

Is it worth it? As painful as that dollar amount seems to be, I truly view chances to show my children the world as they're growing up and developing as people to be invaluable opportunities.

The question comes down to this: How can an ordinary American family balance the cost of five-figure travel with the need to keep day-to-day finances in order?

The solution is simple: Plan way in advance.

For example, our family plans on taking this journey to Paris in six years. We're also planning three other international trips for the years immediately following the Paris trip. Here's how:

Step 1. Budget each trip.

What will it cost? Check out travel guides from the library to get a sense of what you want to do on the trips, and what it will actually cost.

Also estimate what inflation will add to the cost of those trips. I recommend a 5 percent per year inflation factor when figuring out these travel budgets.

After this research, you've got some numbers to work with and an estimate for each trip of your dreams.

Step 2. Set up a savings plan.

Find out what you need to save each month in order to reach these goals. Let's say you need to save $15,000 in six years, $17,500 in eight years and $20,000 in 10 years, hypothetically. These would be reasonable family budgets for international travel down the road.

For the first goal, you would have 72 months to save that much, so you'd need to save $208 per month. Assuming you'll earn a little interest, you can easily slice that down to $200 a month.

For each of the other goals, you can save a little less each month. The second goal would require only $180 per month, while the third goal would only require $160 per month with similar rounding.

Now, these goals are simultaneous, so that means, in theory, you should save $540 per month for the first six years, $340 per month for the next two and $160 per month for the final two years. Alternately, you could simply put $420 per month into a savings account and just cover each trip as it arrives.

Depending on your financial state, $420 per month may seem like a lot of money to pay for three trips far down the road. However, saving a much smaller amount each month starting now makes those trips easy to pay for in the future, while not saving at all would make those trips a heavy financial burden when the time comes.

Step 3: Take frugal vacations in the interim.

Reduce the cost of travel now so that you can afford better vacations later. We do a lot of summer camping instead of lengthy trips, and when we do go on larger trips, we usually stay with friends and family to keep costs low. This enables us to put our annual travel budget toward those dream trips instead of spending it away now.

The important thing to think about with long-term goals like this is that the end will arrive sooner than you think. The money you save each month won't have an incredible impact on you now, but down the road, your savings will open the door to cultural and learning opportunities for your family.

Trent Hamm is the founder of the personal finance website, which provides consumers with resources and tools to make informed financial decisions.