Portugal leads the latest Family Holiday Report as rising holiday costs prompt families to look more closely at spending, while new research reveals most exceed their budgets abroad.

The Algarve has been named the best-value destination in Europe for families in the 2026 Post Office Travel Money Family Holiday Report, with Portugal, Bulgaria and Spain emerging as the strongest choices for travellers looking to keep holiday spending under control. The findings come as many UK families prepare for the summer break while continuing to feel the impact of higher living costs.

Now in its 18th year, the Family Holiday Report compares the cost of everyday tourist purchases across 22 European destinations. Working with TUI, Post Office Travel Money measured the price of a basket of 10 items including family meals, drinks, suncream and insect repellent to help travellers estimate how much spending money they are likely to need.

The Algarve moves up from third place last year to take the top spot after prices fell 2.7% year on year. A basket of the 10 items costs £140, narrowly undercutting Sunny Beach in Bulgaria, where the same basket costs £142. Although prices in the Bulgarian resort have risen by 9.3%, it remains one of Europe's cheapest family destinations and offers the lowest-priced evening meal with drinks for a family of four at £73.

Spain performs particularly strongly in this year's rankings, with six destinations making the top 10. Lanzarote takes third place, followed by Menorca, the Costa Brava, Tenerife and the Costa del Sol. The Costa Blanca also enters the top 10 after being added to the report for the first time alongside Menorca, Sorrento, Tenerife and Zadar, reflecting growing demand for holidays in Western Europe.

At the opposite end of the table, Sorrento is the most expensive destination surveyed. At £268 for the same basket of items, it costs almost twice as much as the Algarve. The report also highlights wide differences in prices across Europe, with costs varying by as much as 92% between the cheapest and most expensive destinations. Even resorts within the same country show significant differences, with holiday spending in Greece ranging from £181 in Kos to £222 in Crete.

Laura Plunkett, head of Post Office Travel Money, says: "We found big variations in costs between the European resorts surveyed, which means it is more important than ever to do some research before heading off on your holiday to inform how much holiday cash you'll need for meals, drinks and other tourist staples. For those families who haven't already booked and are looking for a late deal, the low resort prices in Portugal and Spain make these countries great value for money, while Bulgaria's Black Sea resorts are strong contenders too."

The report also examines how families actually spend while abroad. Research commissioned by Post Office Travel Money found that three in five families plan to travel overseas during the summer holidays and almost half expect to increase their holiday budget because of rising prices.

Despite this, 85% of parents surveyed say they exceeded the budget they set for their last holiday, spending an average of £380 more than their planned budget of £771. Meals, drinks and snacks accounted for much of the additional spending, while beach activities, water parks and treats such as ice creams also added significantly to holiday costs. The Yonder survey was conducted between June 12 and 14, 2026 among 2,080 UK adults, including 503 parents who holiday with their children.

The report also includes a Children's Beach Barometer, which compares the cost of family extras such as buckets and spades, lilos, snorkelling equipment, ice creams, pedalo rides and water park visits. The cheapest destinations for these purchases are Puglia, Madeira and Marmaris, while Croatia's Porec and Corfu are among the most expensive.

Plunkett says: "Paying for children's beach extras can soon tip the holiday budget into the red so plan carefully. Some parents prefer to set an amount of pocket money to last the holiday so children can choose how to spend it. Keep costs down by packing items like suncream, insect repellent and non-bulky beach gear in the suitcase. This top tip might even be enough to pay for ice creams and pedalo rides on your holiday."