With Joe Biden confirming that the Covid pandemic is over and the US slowly but surely returning to normal, many families have started to plan a well-deserved vacation.
But though the harsh measures put in place to fight the pandemic helped avert a health catastrophe, many family budgets were stretched to breaking point as a result of the almost complete economic shutdown of the US. For that reason, it may be a good idea to start planning for this big break now – to make sure your dream vacation doesn’t come back to bite you.
Read on for some great advice on how to save money for a great vacation, and also some hot tips on where to put money aside and save for your next trip. You’ll also find a number of handy ways you can make your money go further when it comes to traveling abroad, as well as some money-saving tips to cut the costs of any expenses that may come to pass.
Create a vacation budget
Before you start saving your money, you will need to figure out a budget. That way you know exactly how much you need to be putting aside each month, as well as motivating you and setting you with a goal that you will need to work towards.
In order to set yourself with a realistic goal, you should write down exactly how much you are getting paid each month, as well as what your average monthly outgoings are including essential expenses, such as bills or loan repayments. That way you know exactly how much surplus income you have to work with and will be able to figure out the best ways to save.
Figure out any expenses
It is also a good idea to plan your vacation and write down any potential expenses you think you may have to pay. You will need to decide what kind of vacation you want, whether it’s a cheap and cheerful break in a rented beachside apartment, or whether you want to treat yourself with the five-star, all-inclusive resort. Once you have decided on location and the type of holiday, you will also need to cost for the price of other things, such as flights, vacation clothes, and any excursions—this should give you a rough idea of how much you need to save in total. That said, you should be realistic in what you will do on holiday. Time is limited and if you factor in jet leg then a seven-day break will most likely give you five days of actual downtime to play with.
You may also want to account for any unexpected expenses that may occur, as well as potentially factor in the cost of these expenses versus the cost of getting vacation/travel insurance. No one wants to think about breaking a leg when vacationing but being insured before you set off will help make an unpleasant experience a little less stressful and expensive in the long run.
Set manageable savings targets
Once you’ve worked out how much you need, you should set attainable and manageable monthly savings targets for you to hit. You should also set yourself a deadline for when you want to reach your savings target. That way you can define savings milestones that will help you stay motivated and working towards your savings goal.
Your savings target may seem daunting at the start but that’s why it’s useful to break it down into smaller chunks, with these milestones a good way of charting your progress and encouraging you to stick to your goal. You may even want to treat yourself when you reach one of your targets.
Track your savings
You should make sure to track your progress on a regular basis, that way you know exactly where you stand and how much you’ve managed to set aside already. Spreadsheets are a useful way of doing this although, let’s be honest, sometimes staring at a wall of numbers and trying to square a circle can be exhausting. For that reason, more visual ways of tracking your progress may also prove useful, for example a thermometer chart, which is a fun way of tracking the amount you’ve already saved and help you keep to targets.
If you are struggling to find enough money to save, you may want to cut back on unnecessary monthly spending. For example, cut back on after-work socializing or dinner dates, as the savings you make now will go toward financing that well-earned vacation break and new and exciting experiences.
Set up a standing order
Saving money can be a real challenge for some people—sometimes the urge to spend your money before putting it away can be too much, especially when you’ve just been paid and you want to splash out a bit.
For this very reason it may be a good idea to set up a standing order from your main current account to your savings account. That way, as soon as the pay-check funds hit your account, the portion you have set aside for the holiday fund is automatically transferred to your savings account.
Juggling your finances and having to remember to transfer money can be more than one can manage, and this is where a standing order comes into its own. With the order in place, you can at least tick one thing off your to-do list and rest easy knowing that you are setting money aside for your vacation.
This is one of the better ways to develop good savings habits as it requires very little effort from the saver. All you need to do is set it up and the rest is taken care of.
Work out where to save your money
Deciding where to save your money is the next thing you should figure out. There are a wide variety of choices when it comes to savings accounts, each with its own benefits. It’s important that you pick the one that is best suited to you and your needs when you’re saving for a vacation.
Usually, you will have a choice of either a traditional savings account or a high-yield savings account (HYSA).
A traditional savings account is a great place to put money aside for any short-term goal, such as the holiday fund. As of April 2020, there are no restrictions on the number of withdrawals you can make from your savings account, though some banks continue to impose a limit voluntarily as of 2021, and in order to avoid possible fees on withdrawals it is best to plan any withdrawals in advance.
Another option worth considering is the HYSA, which is a savings account that offers a higher interest rate than normal savings accounts. This can be up to 10 times more in interest than a normal savings account and for this reason a HYSA is also a good option worth considering.
A Roth IRA is a savings account where your contributions grow free from income and capital gains tax, and, in addition, there are no taxes or penalties if you want to take out the capital you have put in (excluding income and gains).
A Roth IRA is designed to be your retirement fund thanks to its penalty-free withdrawals, assuming you have had the account for at least five years. If this is the case, then the Roth IRA is a flexible savings tool that is responsive to both your long-term and short-term financial needs.
You should also bear in mind that a Roth IRA has an annual contribution limit of $6,000, so if you were planning a more expensive vacation, you may want to look into a different type of savings account.
A jar at home
Tried and tested, and, for many, sure to bring back childhood memories, the piggy bank and small change jar are just as effective now as they were when we were little. The nickels and dimes really do add up, and starting small and putting any spare change in a jar at home can make a big difference. Something is better than nothing, after all.
This is a great way to build up any excess money you have lying around or rattling in your pockets. While this may not seem as though it would have much of an impact on your vacation fund, if you saved just $10 a week in your jar, you would have earned $40 in a month and $480 in a year’s time.
Saving in a jar could also be a fun way to watch your savings grow since you can actually see the jar fill up, and it is a great way of getting the entire family involved in saving. Why not make an event out of filling up the jar by gathering everyone round to smash it open together—just watch out for the glass!
Speaking of family, getting them or a friend involved is a useful motivational tool to help you stick to your goals and save.
Since a lot of self-control is needed to save money, getting a friend involved and motivating each other to save can help take the stress out of the journey. Even if your friend is saving for something other than a vacation, it could still motivate you to know that you both are heading towards the same goal.
It may also end up saving you some money in the long run—after all, if you are both saving then you both know that meeting for drinks or a dinner is going to impact your ability to save and, as such, the prospect of grabbing a six-pack and chilling in the yard is a lot more appealing for the both of you.
Automatic savings apps
Automatic savings apps are designed to make the process of saving as easy as possible and are great for those who find it hard to manage their finances.
Acorns is one of these automatic savings apps. This app is a great way of growing wealth incrementally; with any purchase you make, the app will round it up to the nearest dollar and automatically add the difference—taken from a linked spending account—to an Acorns investment account. This is a great way to accumulate savings without even noticing it happening.
Best of all, if you make a purchase using a promotional bonus offer from one of the company’s partners—such as Apple and Walmart—and use a linked card, the partner gives back to your Acorns investment account.
Another good automatic savings app is Qapital, which has a standout feature on its premium account service I really like, namely, it lets you create a savings Dream Team, where you can invite a partner to your goal. This is a great way of getting family and friends involved in saving together.
How to save on the cost of a vacation
As well as saving for your vacation, you should also think about ways you can make your savings go further. Luckily, there are lots of ways you can cut the costs you may face, potentially reducing the amount you need to save in the first place!
Look for package vacations
Planning every aspect of your vacation can be complicated. You need to think of everything you want to do, pull the prices together, and work out how much you need in total. If this part sounds like too much fuss, it may be worth looking into a package vacation.
When you book a package vacation, all your expenses are neatly included in one tidy lump sum. This means no more unnecessary stress—everything has been sorted for you.
It gets better though; package vacations can sometimes be cheaper than organizing everything piecemeal, so there may be a saving to be made along the way.
It is worth keeping in mind that although most of your expenses are usually covered with a package vacation, it’s still wise to budget for any other costs that may occur that aren’t included in your package, such as extra food and drink, taxis, excursions, extra-curriculars, or indeed souvenirs.
Use flight comparison services
If you plan on flying somewhere exotic for your vacations, the chances are the flights will be one of your biggest expenses.
It is for this reason you should ideally use flight price comparison websites when booking. Services such as Kayak are great—they don’t just save you money, they make the whole process of booking flights less of a headache.
Think of these flight comparison sites like an online travel agent; they show you all available flights, the cheapest options, any deals available, and the cheapest days to fly—all at the touch of a button from the comfort of your own home.
Clear cookies when you’re searching for flights
This may seem like a strange thing to be thinking about when you’re planning your vacation but clearing your browser cookies when searching for flights can go a long way in saving you money.
Cookies are bits of information that your browser keeps about your web searches.
The prices of flights shown on websites are based on demand—the more people that search the flights, the higher the website deems the demand, which then pushes the prices up. This is called “dynamic pricing”.
If you keep searching the same flights to assess different deals, chances are you are only increasing the price. This is why you should clear your cookies—the website will assume you are a new viewer, so prices may be lower.
Keep in mind that clearing your browser history won’t have the same effect on dynamic pricing as clearing cookies.
Consider cheaper travel options
As mentioned before, flights are most likely going to be your largest expense. In fact, depending on where you want to go, you may need to pay a significant sum for flights.
So, you may want to consider choosing cheaper travel options. Sadly, Mexico pulled the plug on cross-border rail travel so the only destination available by rail for US tourists is the Great North of Canada. But for those who are young at heart, long-distance coach travel helps cut the expense of your trip, as well as doing away with the stress of airport security and check-in.
Admittedly, this may not be the most comfortable way of traveling, but if you are looking to save on expenses and are traveling with family then this is one way you can make big savings.
Choose off-peak flying times and dates
Depending on how flexible you’re willing to be when it comes to flying, booking flights during off-peak times may result in decent savings.
Flying at more difficult times, such as late at night or early in the morning (which is called the “red-eye”, for good reason), may be more inconvenient, but they tend to be much cheaper.
It is also worth keeping in mind that flights are typically more expensive during school breaks, such as during the summer vacation or national holidays. If you really want to save money, it may be worth avoiding traveling during these times, if possible, as you will find that out-of-season prices are significantly cheaper than during the peak. This applies not just to airplane tickets but also accommodation and other expenses.
Long-haul flights with one or more transfers may also be cheaper than direct flights.
Book low-cost accommodation
After flights, accommodation is most likely going to be your next biggest expense. If you are willing to view your accommodation as nothing more than a place to sleep after enjoying a relaxing day outside, you can make big savings by picking the low-cost option.
Airbnb, for example, could be a great way to find different places to stay that are well within your budget. It may also make things much easier to plan as you can see exactly what the property is like, you can compare prices with other similar accommodation, and even see reviews to judge cleanliness, value for money, and the location. It’s also a great way of experiencing a touch of local color and staying away from the herd as oftentimes these properties are owned and operated by local residents.
You could even try staying in hostels, which are typically much cheaper than other types of accommodation. You may be sharing a room with people you don’t know but, for some, meeting people from all different walks of life may be part of the experience and provide you with an even richer vacation experience.
Assess your travel insurance options
No matter what you are planning on doing while on your vacation, you should ideally get travel insurance. After all, it is better to err on the side of caution when it comes to your health, as you don’t want to have an accident and have to pay for healthcare.
Being prepared can never hurt, however, so it is always worth getting normal travel insurance.
Shop around for your travel money
Before exchanging your money, you should shop around for the best exchange rate.
The airport, for example, isn’t the best place to get your foreign currency. This is because it’s essentially a captive market and, as such, the rates are far from being competitive. You may want to consider changing your money at a local credit union or larger bank as they offer fairly competitive rates and are convenient.
Another solution to this may be to forget exchanging altogether and choose a bank account that allows you to make withdrawals in foreign currency. Monzo, for instance, offers competitive exchange rates and 0% fees for spending or withdrawing money abroad.
They are simple to use, allow you to easily check how much money you have left, and are much safer as you don’t have to carry around a large sum of cash. It’s worth keeping in mind, though, that you need to get the card posted to your home address, so you need to organize this well before you travel.
You should always research the area you are traveling to before you leave, as some places (such as many of the Greek Isles) will require you to pay cash. You may also want some extra cash on hand for tips, such as tour operators who have given you a memorable experience.
Consider all-inclusive resorts
If you are fine with the idea of spending a lot of time at one resort, then an all-inclusive vacation may be for you.
Typically, all-inclusive packages require you to pay one lump sum, then you can eat and drink at the resort for “free”.
While this may mean you’re restricted to one place, you can be smart about it and still visit the sights. You could plan your excursions around mealtimes—you could have breakfast at the resort, go out for the afternoon, then come back for lunch to avoid paying for expensive meals.
You should still ideally aim to take money with you, however, as some unexpected vacation costs may still arise, no matter how well your itinerary is planned out.
In conclusion, I hope this guide has helped you prepare and plan for your well-earned dream vacation. As long as you have set yourself a realistic goal and break down the saving process into small and manageable steps then you too can kick back and relax without breaking the bank.
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