Money Travel Tips: How to Save For a Vacation

Relaxing on the beaches of Cuba!
Relaxing on the beaches of Cuba!

Planning an international vacation is an exciting project that takes a lot of preparation. There’s so much to think about—choosing a destination, researching the best attractions, and determining if there are any special health considerations or paperwork. There’s also a lot to organize so it’s best to get started months in advance (maybe even a year if it’s an overseas trip).

On top of the logistics of planning an international vacation, there’s also one very crucial aspect of your trip to consider – the financial cost. Depending on where you are planning to go, an international vacation could be cost-effective or expensive. Southern vacations tend to be less expensive than European vacations, but for all types of vacations you’ll need to consider the following costs:

  • Flights
  • Accommodations
  • Local transportation
  • Attractions
  • Food
  • Miscellaneous spending

If you’re planning the trip yourself, you’ll need to do your research to forecast costs for all of the categories above. If you’re purchasing a travel package, some of the categories above may be lumped together under a single fee.

Fortunately, planning your trip a year in advance means you’ll have a lot of time to save for the trip. Once you estimate the cost for each of the items above, you can add up the total dollar value and determine how much to save monthly. Depending on where you go, that could mean spending between $3,000 and $6,000 for a single person to travel. But where should you save all of this money?

Since you’re saving the money in advance, you should consider using a financial product that lets you earn interest on your cash and shortens your overall timeline to reach your financial goal. If your money is going to sit there until your trip, make it work for you while you count down the days until your vacation.

You have two primary options for a short-term savings goal: A GIC or a high-interest savings account.

Using a GIC To Save Money for a Vacation

Let’s look at an example assuming the average cost of a trip to Europe for two people at $6,670. In this case, you’d need to save $555.83 per month to afford this trip in a year. If you chose to put this money in a GIC, you could invest in a series of 90-day GICs earning up to 1.6% on each term. You’ll need to keep track of the maturity dates and reinvest your money as your GICs mature and as you save new funds. Just remember that your funds are locked in until your GIC is mature, so make sure you plan properly to have your GICs reach maturity before the time comes to book flights and accommodations.

Using a High-Interest Savings Account to Save for a Vacation

If that sounds like too much work, you may want to consider using a high-interest savings account to store your money. You can deposit money into a high-interest savings account automatically where it will compound. Rates vary but some providers offer as much as 2.5%.

A high-interest savings account is a great option because you can deposit and withdraw cash whenever you need to without worrying about maturity dates or having your money locked in. High-interest savings accounts also offer higher interest rates compared to short-term GICs. However, if you’re planning a multi-year savings plan for a very extravagant trip, GICs might come out on top.

No matter what method you choose to save your money for your international vacation, the important thing is to plan your trip, carefully research the various costs and options, and save at least 10% more than you think you’ll need.

Fortunately, in the internet age there is no shortage of first-hand accounts of the cost of various vacations, and with enough research, you can arm yourself with enough information to make your vacation a success.

How do you save for a vacation? Leave your tips in the comments below!

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