Mike and Kate's nearest financial goal is to make enough savings to fund the family's holiday trip

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Question:

Mike and Kate's nearest financial goal is to make enough savings to fund the family's holiday trip to Canada in 7 months. Based on their cost estimate for the flight, accommodation, food, attraction tickets, and local transportation, this trip will cost around $50,000 for the family.

Mike and Kate want to use 70% of their monthly surplus to save for the holiday trip to Canada. Will they be able to achieve the target of $50,000 in 7 months' time? Assume a constant monthly return of 0.5% can be achieved. The cash balance ($20,000) at the bank is for emergency use only, so should not be used as part of the savings for the trip.

In the next 7 months, there are several changing factors that may impact the financial plan:

Mike and Kate's home loan is locked into a fixed interest rate (2.2% p.a.) which is about to expire in 6 months. The loan will then revert to a variable interest rate that is significantly higher than the fixed rate.

RBA has announced another increase in the interest rate. And the interest rate is expected to stay high for some time.
The inflation rate in all countries has hit a record high due to the rising petrol cost.

With reference to Mike and Kate's information provided in the case study, explain how these factors will affect their financial capacity to achieve the target. (no calculation is needed)

Identify two additional risk factors that may affect Mike and Kate's financial goal of saving for the two-week trip.