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.
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:
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.
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.
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.
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.
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.
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.
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:
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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