Nearly Two-Thirds of Americans Pay for Their Vacations With Savings – How to Build Your Fund
Despite the constant news about Americans overspending on their credit cards, when it comes to travel, they seem to prefer using their savings. That’s according to an April 2022 survey from GOBankingRates, in which 62% of respondents indicated that they used savings instead of a credit card or other source of funding for their travel expenses. It’s a smart decision, because going into debt just to go on vacation can have long-term financial consequences. If you’re looking for help building your own travel fund, Check out these tips that can help you save for a great vacation while avoiding debt.
Set up a dedicated travel fund
Saving for travel is a good strategy, but the best way to ensure you’re saving is to create a separate account dedicated exclusively to your travel fund. Most Americans have multiple savings goals, from retirement to funding education to emergencies and more. If you keep all that money in one account, you risk using it for other purposes. You don’t want to be forced to “borrow” from your retirement savings to fund a vacation, just as you don’t want to draw emergency funds from your travel savings. Keeping your accounts separate is also a good way to know how close you are to reaching each of your individual savings goals.
Configure automatic transfers
Saving is inherently difficult for most Americans. While most people want to save as much as possible, the reality of everyday life often provides inconvenient excuses. If you intend to build as large a travel fund as possible, you should seriously consider setting up automatic transfers. With an automatic transfer, you don’t have to worry about missing a deposit in any given week or month. Perhaps most importantly, you’ll protect your travel savings from impulsive spending or the money being used for other purposes since it will automatically be deducted from your checking account without you even thinking about it.
Deposit all deals
An exceptional payment is any type of money you receive that you did not expect or is out of the ordinary. A year-end bonus, for example, is considered a windfall, as is an inheritance or a large tax refund. Whenever you receive an exceptional payment, immediately transfer it to your travel fund before you feel the temptation to spend it. Windfall gains can be a great way to quickly boost your vacation savings fund.
Use rounding counts
Another great way to funnel more money into your travel fund is to use an app that rounds up your purchases and deposits the extra amount into savings. Let’s say you buy a cup of coffee for $3.69, for example. A roundup app will charge your card $4, with the additional 31 cents going to your travel fund. Although it may not seem like much, these small amounts can add up quickly. Add to your other daily purchases and you could end up saving a few dollars every day. At the end of a year, you might be able to save $1,000 or more in your travel fund without even realizing it.
Make your travel fund bigger than expected
One of the best ways to make sure you don’t blow your travel budget is to make sure your savings goal exceeds what you think you need. Most travelers tend to overspend while on vacation, so to avoid going into debt, add at least 10% or 20% to what you think you need. You can achieve this in a number of ways, from saving extra each pay period to postponing your trip for a few months to accumulate more of your savings.
While there are many ways to fund a vacation, saving enough money before you travel can prevent stress and allow you to have a guilt-free vacation. Nobody wants to go home from vacation with a huge pile of debt, so put these specific processes in place ahead of time so you’re constantly replenishing your travel fund.
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This article originally appeared on GOBankingRates.com: Summer travel 2022: Nearly two-thirds of Americans pay for their vacations with savings – How to build your fund