Put water and sugar in a medium saucepan and bring to a boil. Lower heat and let mixture simmer for about 10 minutes until sugar is completely dissolved and mixture has thickened a bit.
Pour syrup into a heat-proof jar or container. Scrape out some of the seeds from the sliced open vanilla pod with a sharp knife and add them and the vanilla bean into the syrup.
Place syrup in fridge and let steep for at least 6 hours**. Syrup will thicken more as it cools. If you want a more intense vanilla flavor, you can leave the bean in after 6 hours.
For a quicker vanilla syrup, you can use vanilla extract instead of a vanilla bean. Stir about a Tablespoon of the extract into the saucepan right when you remove it from the heat. Syrup will be ready to use as soon as it cools.