How to Save for a Vacation

Do you feel restless and unmotivated at work even though you love your career? If so, it could be a sign that it's time to step away for a few weeks. (And not to crash on the couch and binge-watch a new Netflix series), but maybe to embark on a trip overseas?

Like many people, however, your enthusiasm may start to fade once you contemplate the costs involved. A worthwhile getaway can be mighty expensive and put a severe strain on your budget.

For this reason, drafting a plan and preparing financially ahead of time is essential if you're eager to travel - and that plan should include a vacation fund.

Why You Should Have a Vacation Fund

You wouldn’t expect to purchase a car, home, or pay for your college education without a concrete savings plan, right? Those things don’t come cheap. For the same reason, establishing a fund geared toward your globe-trotting adventures is a wise move.

A disorganized and erratic savings plan won't get you anywhere and will likely leave you with a shortfall. And by the time your departure date rolls around, it'll be too late to scrounge up the cash you need. Sure, you could always rely on your handy credit card to bail you out, but that only means getting hit with interest charges and sliding further into debt.

How to Save for a Vacation Fund

Follow these five steps to get your vacation fund up and running in no time.

Step 1 - Choose Your Destination and Travel Date

Choosing a travel destination and travel date is your first order of business. Knowing where and when you want to go will help you determine how much you can expect to spend, and consequently, how much you’ll need to save. There are always ways to travel cheap, too.

Step 2 - Put Together a Savings Plan

Setting a firm savings target and knowing how much money to set aside each week or month is crucial. After all, if you lack a clear target to aim for, you risk underfunding your trip, which means you'll have to downgrade your vacation expectations considerably—not an ideal scenario!

Decide how you want to structure your trip. Are you primarily interested in site-seeing and relaxing or partaking in an assortment of activities? Do you anticipate doing heavy shopping and dining out extensively? Is staying at a luxury hotel suite non-negotiable, or are you content with a hostel?

A robust savings plan will provide you with the focus, motivation, and discipline to hit your savings target - and ensure you don't stray too far from it.

With apps like Monorail, you can create a savings goal, enter your ‘deadline’ or trip date, and see how much you’ll need to tuck away every week to reach your goal.

Step 3 - Open a Savings Account

It's wise to open a savings account dedicated exclusively to travel. In doing so, you can better monitor your progress and avoid dipping into funds designated for your trip.

Focus on accounts that offer the highest interest rate so that you can maximize your return on each dollar you deposit. Traditional brick-and-mortar financial institutions are a solid place to start, but be sure not to neglect the many online banks available. Ideally, you want to pay the lowest monthly fee possible or avoid it entirely by choosing a no-fee account. Some online banks even offer perks for your trip like travel insurance or a cashback spending card which may prove more valuable than a higher savings interest rate.

One last thing: ensure you arrange for automatic savings deposits - that way, you'll never accidentally miss a payment.

Step 4 - Start Saving Money

The next step is the fun part – collecting the money you need to hit your savings target. To do so, you’ll need to commit to a steady deposit routine.

If you’re struggling to round up money, take a peek at your budget to see if there are areas where you can rein in your spending. By scrutinizing your spending habits, you might discover ways to trim the budget that never occurred to you before.

Consider dedicating any windfalls that come your way to your vacation fund. These can include a hefty tax refund or an unexpected bonus from work. You might also want to try a temporary side hustle, working overtime, or selling unwanted household items.

Step 5 - Monitor Your Progress and Stay Consistent

Periodically checking up on your account's balance is crucial for staying on the right track. If you discover that you’re falling short, it’s time to find more income sources and tweak your budget accordingly. Staying consistent is key.

Ensure that everyone in your household knows the boundaries and expectations regarding the vacation fund. No one should be drawing from the account to pay for everyday expenses, gifts, or anything else that's not vacation-related.

Final Thoughts on Vacation Funds

By starting a vacation fund, you can amass the money you need for the getaway you deserve. You need only three things: a plan, a savings account, and an unwavering commitment to reach your goal.

Not sure where to begin? Apps like Monorail are here to help.

See how Monorail can help you create your vacation fund.

‍