Dreaming of tropical getaways and European escapades, but finding it tricky to save the funds? If you’re planning a vacation, a savings account might help you bring discipline and simplicity to your travel budgeting needs. Let’s look at what a vacation savings account is, how it works and some tips for getting the most out of this potentially valuable tool.
Why open a vacation savings account?
Having a vacation savings account, also referred to as a travel savings account, offers you a few potential advantages beyond the benefit of saving for your next trip. Here are a few reasons you might consider setting one up.
- Better discipline: Having a savings account specifically for vacations might make you less likely to tap into it for other purposes, potentially making it easier to stay disciplined with your savings goals.
- Simpler budgeting and tracking: With a vacation savings account, your travel savings are separated from your general savings. This way, you never need to figure out how much you have for your travel budget. Additionally, during your vacation, you don’t need to wonder if you’re overspending — a vacation savings account keeps your limits clear.
- Peace of mind: Another potentially overlooked benefit of a vacation savings account may be that it might provide a financial cushion for your vacation-related expenses. This could mean less worrying about an unexpected bill throwing your money off-kilter when you return.
How to set up a vacation savings account
Opening a vacation savings generally follows the same steps as opening a new savings account. The only difference is this is one that will be used to help realize your travel goals, while the other can be used for another savings goal or as an emergency fund. The question then becomes: which savings account is best suited for your vacation fund? Since this account will serve a specific purpose — saving up for more trips — there are certain features and conditions you may want to pay extra attention to.
Interest rates and fees
Interest rates and fees make a difference in how fast your vacation fund grows. Higher interest rates might help give your savings a slight boost, while lower fees could mean more savings.
Accessibility and features
Consider the ease with which you can access your funds and any additional features that come with the account. Automatic transfers could help keep your saving consistent and get you on the road sooner. Mobile banking might be especially helpful for keeping tabs on your money once you’re on the move.
Minimum balance requirements
Certain accounts require you to keep a minimum balance to either avoid fees or earn interest. Keep this in mind and weigh it against your timeline and travel goals.
Tips for saving for a vacation
Once you’ve picked out the savings account for you, you might want to start looking at ways to optimize your saving strategy. With the right vacation savings plan, it might just prove a dynamic tool that helps get you lounging in the sun sooner.
Consider a side gig
If your regular income isn’t enough to meet your vacation savings goals, you might consider taking on a flexible side gig. Reviewing the many side hustle ideas out there might present opportunities that match both your schedule and your skill set. The additional income could go straight into your vacation savings account.
No vacation savings plan is complete without a set of clearcut goals. It might be helpful to break up your travel goal into smaller milestones. This could make the process of saving up feel more manageable and less overwhelming. You could also set savings challenges for yourself, such as saving a certain amount by a certain date, to stay motivated.
Allocate your income
If your current job allows you to allocate your income to different accounts, consider having a set dollar amount go straight to your travel savings fund. That way, you’re automatically saving towards your goal without having to move funds from your main checking account each pay period.
A vacation savings account is more than just some place to stash your cash. With a little foresight, it may be a comprehensive way to help bring structure, clarity and peace of mind to your vacation planning.