Everyone needs a break from time to time. But since even short vacations can get expensive, it’s essential to have a vacation fund savings plan in place. Here are some of the best vacation savings accounts to help you take your next trip sooner.
Saving for travel? Here are 16 tips on how to save money for travel
Saving for travel can feel like an elusive goal with so many other expenses on your radar. But it doesn’t have to be. Whether you want to backpack across the globe, escape to a weekend retreat or stay at a luxury five-star resort, saving for vacation is within your reach.
Here are 16 tips on how to save money for travel that can help you take flight (or drive that car) faster than you think.
1. Budget
If you’re not already operating on a budget, consider making one. If you have a budget, now is the time to review it. Outline all of your expenses and how much income you have coming in.
Don’t be afraid to get detailed. If you eat out several times a week, consider adding a restaurant line to your budget. The point of a budget is to help give a clear and accurate picture of where your money goes, so more information can really help paint the big picture.
2. Cut down on expenses
Look at any non-essential expenses to see where you can cut down and save money for travel.
Do you really need that streaming subscription? Can you try making gourmet meals at home instead of going to a restaurant? Can you brew your morning cup of coffee at home instead of buying it every day?
You might even be able to save on some necessary expenses. Meal planning and sticking to a list can help you save money on grocery shopping. See if you can qualify for cheaper car insurance with a different insurance company. Free car insurance broker platforms, like Surex, can help you easily compare multiple offers at once.
Even if these savings seem small, they can add up to hundreds of dollars in travel savings by the end of the year.
Hot tip: The 30-day rule
To help increase your savings for travel, cut back on impulse buys using the 30-day rule. The 30-day rule states that you wait 30 days before making any pricey purchases. You’ll often find that something that seems like a really good idea in the moment might not seem worth the money 30 days later, and you can put that money in your vacation fund instead.
3. Make a savings target
Create a travel budget based on where you want to travel — including transportation, accommodation, food, shopping and any activities — to calculate exactly how much you need to save for your trip.
Try to make an accurate travel budget by looking up how much hotels cost where you want to stay, how much transportation there costs and even how much the average restaurant in the area charges per meal.
Then set a timeline for when you want to book your trip so you know exactly how long you have to meet your goal.
4. Open a high interest savings account
Let compound interest help build up your savings for travel even faster. While standard savings account interest rates in Canada can range at around 1.5% at most, some of the best high interest savings accounts offer savings rates of anywhere from 2.5% to 5.0% or more.
That’s why it’s worth comparing the best savings account for travel fund options to make sure you’re getting the most out of your money.
Compare high interest savings accounts in Canada
5. Automatically transfer to savings
Setting up automatic transfers to your travel savings account every time you get paid can be a great way to consistently build up your travel savings without being tempted to use that money elsewhere. You can then sit back and watch your savings grow every month.
6. Use a physical travel fund jar
Having a travel fund jar at home can be an easy way to put loose change and any extra cash in your wallet towards your savings goal. It can also encourage you along your saving journey — as you watch your travel savings jar fill up, you can be reminded that all the other financial sacrifices you’re making are worth it.
Just remember to deposit the money in your savings jar into your high-interest savings account to earn interest on it as well.
7. Save on travel costs
There are plenty of ways to lower the cost of travel. Consider using airfare comparison websites to make sure you’re getting a good deal on your flight. You should also consider booking your flight as far in advance as possible to lock in a lower price.
Another way to save on travel is to book outside of peak tourist season. Hotel and airfare prices can all be lower by hundreds of dollars during off-peak seasons, depending on the destination.
8. Try alternative places to stay
Hotels can be pricey. You can potentially save on travel expenses by opting to stay in hostels or by house-sitting. Airbnbs are another great option where you can potentially save by booking an entire home with a group of people and splitting the cost.
9. Only use a carry-on
Cut down on the amount of savings for travel you’ll need to build up by avoiding expensive checked-baggage fees and only using carry-on luggage when travelling. That way, you’ll also never encounter the airport-lost-my-bag headache so common these days.
Some tips to pack light include:
Only pack the essentials
Pack clothing pieces you can mix and match to make several outfits from only a few pieces
Use packing cubes to keep your few items tightly packed and organized
10. Use travel rewards
Whether it’s paying for your flight entirely with rewards points or getting a discounted hotel fare, there are plenty of credit card travel rewards programs in Canada that help you save on travel. You can compare some of the best credit cards for travel in our full guide here.
11. Look for savings ahead of time
If you know exactly what tourist spots you want to hit up on your trip, you can add that cost to your vacation fund. Plus, if you do a bit of research ahead of time, you can identify many free or low-cost activities in the area, like famous monuments, parks, street performances, hikes and local festivals.
12. Sell unwanted items
It really is true that one man’s junk is another man’s treasure. Look around your home for any items or furniture you don’t use anymore and think about selling them on online marketplaces like Kijiji or Facebook Marketplace. If you put that money towards your savings for travel, you can build up your travel fund faster.
13. Get a side hustle
Taking on some side hustles can be a great way to earn some extra money towards your travel savings goals. Consider taking on a part-time job, helping a friend with their business, taking on some freelance work or maybe becoming an Uber driver in the evenings.
14. Minimize foreign transaction fees
Using a credit card overseas typically comes with a foreign transaction fee of around 2.5%, which can really add up over time and increase your overall trip cost. Some credit cards in Canada come with no foreign transaction fee or offer other travel benefits and rewards that can compensate for the fee’s cost. Compare the best credit cards for travel in Canada in our full guide here.
15. Track expenses
Even after making your budget, it’s a good idea to regularly review your expenses to make sure your budget is still working for you and that you’re sticking to your travel savings goal. You may also find that there are some new ways to cut expenses and add more to your vacation fund.
16. Stay open
It’s natural to get your heart set on travel plans, especially after you’ve planned and saved for so long. But it’s always a good idea to keep an open mind so you can take advantage of last-minute travel deals.
Let’s say you notice a discount for different travel dates than you had originally intended, consider switching your trip. Your trip can still be amazing even if some things are a little different from what you originally thought.
How much money should you save before you travel?
While how much money you should save for travel depends on your income, expenses and where you want to vacation, most experts suggest you use the 50/30/20 rule to put less than 30% of your income towards travel.
In order to use the 50/30/20 rule, first determine what your earnings are, then divide up the funds into these categories:
50% for needs. These are costs that are non-negotiable and are required for you to survive, such as rent or mortgage payments, groceries and utilities.
30% for wants. Yes, vacations and travel come from the “wants” category, not savings. Virtually, everything that’s considered non-necessary falls into this category, including clothes, dining out and entertainment.
20% for savings. This category is dedicated to saving, building an emergency fund and paying off debts.
Keep in mind that the 50/30/20 rule is meant to be a benchmark. No one will be able to divvy up their finances this way perfectly, but it’s a good starting point for your savings for travel. Below is an example of how to calculate where your money is going using the 50/30/20 rule.
Example: What is the 50/30/20 rule?
Sophie earns $4,000 in gross income a month, and $1,000 is deducted from her pay for employer deductions. Her net earnings are $3,000, which means $1,500 (50%) goes towards needs, $600 (20%) goes towards savings every month and $900 (30%) goes to wants.
She then sets aside $300 every month from the “wants” category towards her savings for travel, leaving her $600 to put towards other non-essential expenses, like eating out, spa days and shopping.
If Sophie deposits that $300 every month into a savings account that earns 3% interest, she would have saved almost $3,959 towards her vacation after only 1 year.
Best savings accounts for travel
A high interest savings account is one of the best ways to build up your savings for travel. We’ve summarized the details of some of the best high-interest savings accounts in Canada to help you save for a vacation:
Bottom line
Whether your travel plans are big or small, years in the making or spontaneous, there are always strategies you can use to build your savings for travel and get ready for that dream trip. Remember, it’s not worth going into debt to travel. Plan ahead to figure out how much your trip is going to cost and how you’re going to pay for it. Then, compare savings accounts to find an option that works for your financial strategy.
Frequently asked questions about savings for travel
The best savings account for a travel fund is a high-interest savings account. You can easily compare high interest savings account options above.
It's always a good idea to give your savings a boost with a travel savings account. By letting compound interest go to work for you, your savings for travel can grow even when you don't add to it.
If you want to open a new account to keep your travel savings separate, look for banks with new bank account offers to maximize your savings.
While there are several tips that can help you along the way to saving for travel, essentially, the best way to grow your vacation fund is to cut down on unnecessary expenses and put as much extra away as you can into a high-interest savings account.
While travel insurance isn't mandatory, it can be a lifesaver if you need medical attention in a foreign country. Make sure you compare multiple travel insurance plans to find one that suits your needs.
Simply put, compound interest helps you save faster. Unlike simple interest, compound interest is calculated on your growing balance, allowing you to earn money on interest added to your account.
Rebecca Low is a writer for Finder. She has contributed to a range of digital publications, including income.ca, Indeed, and Expatden, writing on topics like personal finance, career development, and travel.
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Chelsey Hurst is a Growth Manager at Finder, specializing in banking and investments. She loves empowering people to avoid financial pitfalls and make better decisions with their money. Chelsey has a Bachelor of Science from Redeemer University, a Master of Science from McMaster University, and has won multiple awards for research communication. In her spare time, Chelsey enjoys cooking and taking long walks in nature.
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