Best Ways to Save for a Vacation

October 20, 2022
Best Ways to Save for a Vacation

For many, health and financial concerns during the pandemic resulted in canceled travel plans. If you’ve decided that now is the time to squeeze in a getaway, we’re here to help you plan ahead with a vacation savings account and save up for it.

Putting a vacation on a credit card is a way to buy now and pay later, but saving up for the trip instead means you won’t have to worry about paying down the extra vacation dollars added to your existing card balance when you return. Wondering how to save for your next vacation? We outline seven of the best ways.

7 Best Ways to Save Up for Your Next Vacation

1. Research travel costs and set your budget.

First, think about how much you’re comfortable spending on a trip by researching travel prices for destinations you’d like to visit. Once you’ve estimated how much different trips will cost, choose a locale that fits within your spending limit and create a list of potential travel expenses to save up for. Here are some costs to consider when creating your travel budget:

  • Airfare
  • Accommodations
  • Currency exchange fees
  • Rental cars
  • Highway tolls
  • Gas
  • Meals
  • Souvenirs
  • Excursion and activity fees
  • Travel gear (e.g., luggage)
  • Activity gear (e.g., life jackets or snorkeling gear)
  • Travel insurance

2. Establish a savings goal.

Setting a savings goal gives you a target to work toward to organize your savings effort. To set your savings goal, figure out how much you currently have saved for your trip and how much more you need to stash away to make the trip happen.

Consider adding extra savings into your plan in case unexpected expenses arise, an emergency happens, or an area of your budget costs more than anticipated.

Next, break your savings goals into bite-sized weekly or monthly savings goals. For example, if you want to save $3,000 for a trip to the Bahamas within 12 months, you’d need to save $250 per month for the year. While $3,000 feels like a large sum, $250 might feel more manageable; if that’s still daunting, how about thinking of the goal in terms of around $60 per week, or just under $9 per day? Meeting those micro-goals could feel more achievable than socking away larger sums, and they can still get you where you want to be.

3. Set up a vacation savings account.

When it’s time to start saving, keeping your vacation savings account separate from other savings can make it easier to track progress. Opening a new savings account at your existing bank could take just a few minutes, or you could consider opening a savings account at another bank or credit union.

When comparing new savings account options, review minimum balance requirements, banking fees, and the annual percentage yield (APY), which is the rate of interest you’ll earn while the money sits in the account. Some high-yield savings accounts now offer nearly 3% APY, and that interest added up over time could be enough to buy a few mocktails on the beach or an entire meal while you’re away.

4. Use automatic savings tools.

Using automatic savings tools can supercharge your savings plan by growing your savings balance without you having to remember to make every transfer. Here are examples of automatic savings tools you can use:

Recurring transfers: Your bank or credit union may offer a recurring transfer option where you can schedule money to move automatically from checking to savings each month. With a scheduled savings contribution set up, you can sit back and watch your savings grow.
Direct deposit splits: Some employers will allow you to split up your paycheck direct deposit into different checking and savings accounts. With this strategy, you can elect to have part of your paycheck automatically go into your checking account and part go into your vacation savings account. Consider reaching out to your employer’s human resources department to see if you can update your deposit preferences.
Savings mobile apps: Several mobile savings apps exist that can connect to your bank account and offer creative solutions to help you save. For example, setting up a savings roundup in a mobile savings app could round up every debit-card purchase and electronic payment to the nearest dollar and save the difference. Over time, those small savings can add up.

5. Save up credit card rewards points.

If you already have a travel rewards card in your wallet, strategic spending leading up to your trip could help you earn more points or miles to offset travel costs.

If you don’t have a travel rewards card, consider applying for one that earns points or miles you can redeem for travel purchases, like airfare and hotel stays. Many travel rewards cards come with an annual fee that can be $95 or much more in some cases. However, this fee shouldn’t necessarily be a dealbreaker.

If the value of the rewards offer and credit card perks exceed the fee, the fee may be worth paying.

6. Bring in more income.

Increasing your income can help you reach your trip savings goal faster. You can sign up quickly through a smartphone app to earn extra cash doing rideshare work or food delivery.

Other options could be doing work you do full-time on the side for extra income if your employer allows it. For example, if you work in marketing or bookkeeping, you could offer those services to small businesses and entrepreneurs.

Requesting more hours at your current job, or taking on an additional part-time role could also help you earn more money to put in your trip savings pot.

7. Find ways to stay motivated.

Let’s face it—saving takes patience, and injecting some excitement into the process makes it more enjoyable. For example, you could create a savings diagram that tracks progress toward your goals. Or you could create a vision board with your vacation and do monthly account checkups to see how you’re progressing toward going on that special trip. Finding an accountability partner could be another way to stay motivated and on track.

Save by Reducing Your Vacation Expenses

Using budget-travel hacks could help you reduce costs and save for your vacation faster. Here are a few ways to travel on a budget:

  1. Book early. Booking travel at the last minute could cost you more, so if time is on your side, try to plan travel a few months in advance. According to a 2022 study on airline prices, the most budget-friendly time to purchase tickets is between 127 and 21 days ahead of your travel dates for a domestic flight. The best time to book trips abroad depends on the location. Trips to the Caribbean, for example, are best to book between 1.5 and 5 months before departure.
  2. Book off-season. Booking during spring or off-peak times could help you save on trip costs and avoid crowded airports and resorts.
  3. Work with a travel agent. A travel agent may have access to special deals that could help lower travel costs. Consider pricing out your own trip and then comparing that trip to the price a travel agent gets you to see if they can score you a deal.
  4. Buy a travel package. Booking your flight, hotel, and car together from a travel discount site could help you land a discount. Tally up how much a trip costs separately and then how much it costs booked together to see which will save you the most.
  5. Try other modes of transportation. Flying is expensive right now and airport delays are common, so consider pricing out what it costs to rent a car or take a bus or train to your destination instead. It could be cheaper.
  6. Go to a place with a good exchange rate. If you’re traveling internationally, visit locations where your dollar will go further because you could get more for less.
  7. Look for affordable accommodation. Making budget choices on where you stay, like booking space in a hostel or hotel with minimal amenities, could save you money.
  8. Prepay for your resort stay. If you prepay in full for rooms, you might qualify for a discount. Just be sure to read the fine print because you might not be able to get all of your money back if you have to cancel.

The Bottom Line

Saving for a vacation can take some time, especially when you have other bills to keep up with. But over time, your savings can grow and help you get where you want to go, whether that’s stateside or abroad. With spending money set aside in a vacation savings account, your finances can be less of a concern while traveling, so you can focus on really unplugging, unwinding, and enjoying the experience—because you deserve it.

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