How to Save for a Vacation
As the travel industry begins to recover, you may be feeling a little—okay, more than a little—bit of cabin fever. For most of us, it’s been a year of shut-ins and shut-downs. So now that things are opening up, getting out has never seemed more enticing.
But to make the best of your newfound freedom, you’ll want to have a plan for where you’re going. More than that, you’ll need to make sure you’ve got the money to spend when it’s time to go, and have a strategy for what you’ll spend it on.
Learn some easy tips for saving ahead of time so that when you hit the road, you’re financially ready for that much-awaited vacation.
Follow along as The Balance wades back into travel, too, with “Our Money’s on Travel”—a series of stories about navigating the current world of travel, and how to pay for it.
Set a Vacation Budget
Knowing how much your vacation is going to cost is one of the primary factors you should consider when planning for a trip. Creating a vacation budget does more than just give you peace of mind—it allows you to be prepared for any costs that come your way. This can mean the difference between accommodating unexpected charges with ease or ending up overdrafted on your bank account—or worse, on the hook for high-interest credit card payments.
In 2019, there were 1.9 billion one-person trips booked by U.S. residents, according to the U.S. Travel Association, and direct spending on leisure travel by both domestic and international travelers totaled $792.4 billion.
Common vacation costs to consider include:
- Transportation: airfare, car rental, train tickets
- Lodging: hotel, Airbnb, hostels
- Food: groceries, planned meals out
- Extracurriculars: tours, attraction tickets, souvenirs
- Miscellaneous: rental car insurance, security deposits, unexpected fees
Commit to a Savings Plan
It may seem overwhelming trying to save for a big trip, especially once you list out the numbers. But planning ahead means you’ll have the time to save in advance for all your expenses.
The easiest way to create a savings plan is to divide your projected budget by the number of months until your vacation. This number represents the amount of money you’ll need to save each month in order to have enough saved up for the trip.
Say you’re going to need $5,000 for your vacation and you’re looking to travel in 10 months. You’ll divide $5,000 by 10 to come up with $500—this is how much you should plan to save each month.
If the number you come up with seems insurmountable—don’t worry. There are many ways to make this manageable, including the following strategies.
- Stretch out your timeline: If you can, push back your vacation by a month or more. If you’re able to do so, this will decrease your monthly savings amount, giving you more time to save up.
- Trim the fat: Take a look at the planned expenses you have thought about and see if there are any costs that can be reduced. Can you take public transportation instead of renting a car? How many bags are you checking that may incur extra cost, and could you instead use a credit card that gets you free checked bags? Slimming down some of the extras in your trip can drop your overall total.
- Set up a savings account: Checking accounts are usually non-interest bearing. Instead, open a savings account that’ll earn you some money for every penny you save. Maximize your savings by opening a high-yield savings account rather than one at your local bank.
Use a Credit Card to Kick-Start Your Savings
If you’re looking for a way to cut down significantly on your travel costs, you may want to consider opening a travel rewards credit card. Often, these credit cards will come with a large welcome offer when you reach a certain spending goal. These points can then be redeemed for flights, hotels, and even tours, depending on which travel rewards credit card you choose.
If you sign up for the card early enough and spend on daily essentials regularly, you’ll earn even more travel rewards points on top of any sign-up bonus, all of which can help defray your travel costs.
Automate Your Savings
It can be difficult to remember every time you’d like to transfer money to your savings. Fortunately, there are plenty of options that’ll automate the process for you—and some will even reward you for it.
- Most banks will allow you to create a recurring transfer into a dedicated savings account.
- Programs like Bank of America’s Keep the Change and Chime's automatic savings round up the change from your debit card transactions and automatically transfer it over to your savings.
- Mobile apps such as Acorns act similarly, as they round up your transactions and then invest your savings into the stock market.
Look for Ways to Earn or Save More
If the cost of your dream vacation exceeds what you’re able to save from your monthly earnings, it’s time to examine big and small ways to boost that amount.
- Consider taking a side gig or renting out a room: Is there part-time work you could take on for a while to bulk up your vacation savings? Or could you get a roommate to earn some extra income? Strategies like these can super-charge your savings.
- Cut expenses at home: Reduce entertainment expenses, cut the cable cord, or replace restaurant meals with home cooking. Apps such as Trim and Truebill can also help by checking and canceling unwanted monthly subscriptions, negotiating lower bill payments, and even providing you a bonus on the amount of money you save each year. Then throw all that extra money into your vacation savings.
- Use shopping portals: An online shopping portal is a site that rewards consumers with points, miles, or cash back for making purchases through various merchants. When shopping online, use a shopping portal such as Rakuten to earn cash back on your purchases. Cashback Monitor will show you which programs are offering the best returns on any purchases you make.
- Add in cash-back apps: Apps such as Ibotta, Dosh, and Fetch will give you cash back on groceries, dining, hotels, and more. Some of these services are automatic, while others require that you upload your receipts. When you use these with rewards credit cards, the extra earnings can add up.
The Bottom Line
Expenses from vacation can add up, so it’s important to make sure you’re saving the money to go along with it. From trip budgeting to automated savings, preparing for travel can be easy, and will ensure that your vacation goes off without a hitch.