- When I started saving for a trip to Italy for two, I didn’t have much experience with big spending.
- I spoke with two financial planners about how to effectively save for travel.
- Next time, I plan to research savings accounts, use a travel rewards credit card, and budget in advance.
When I started saving for a trip to Italy as a couple, I was new to personal finance.
With little experience saving for a large discretionary expense, it took almost three years to save over $5,000 for the trip. I’m proud that I pursued and achieved my goal, but there are also some things I wish I could have done to save more quickly and efficiently.
After talking to two financial planners about saving for a trip, here are a few things I’ll do differently for future trips.
1. Research different types of savings accounts first
If you’re looking to save money for a short-term savings goal like a trip, Jerel Butler, financial planner and founder of Millennial Financial Solutions, says online banking can be a good option.
“I would suggest an online savings account with no debit card available. That way that money is really dedicated to that purpose. You’re not going to take it out,” Butler advises.
While saving for my trip to Italy, I started by depositing money into a traditional savings account that paid 0.05% APY. Once I learned more about the different types of savings accounts available at financial institutions, I switched to a CD. Then I took some money off my CD and put it in a high yield savings account to have easier access to my money.
In retrospect, it would have been better to compare different savings accounts at the very beginning. Then I could have figured out if my current savings account had a competitive interest rate or if I wanted to deposit my money elsewhere.
2. Incorporate travel savings into my regular budget
When I spoke to Rachael Burns, financial planner and founder of True Worth Financial Planning, about saving for travel, she said, “If travel is important to you, it should be of your annual budget. You know, every year you’re going to spend around a certain amount.”
It resonated with me because the first few months of saving for my trip felt like a huge hurdle that I would never overcome. I had no savings to travel, so I needed a long lead time to be able to reach my goal.
Now I plan to readjust my budget to contribute a little money each month for travel – it’s something I love, and that’s all the justification I need. When I plan my next trip, I will already have money in my account for the expense, which will speed up the overall savings process.
3. Take advantage of a travel rewards credit card
“If you’re traveling and you have a travel card or some type of credit card that allows points, flights, types of rewards to use it, that should probably be the first thing you should do for major purchases” , recommends Butler.
Unfortunately, I did not have a travel rewards credit card when I paid for my major hotel and flight expenses. And even if I had, I don’t think I would have been confident or skilled enough to use it effectively.
Travel rewards credit cards take time to understand and research. Finding the right credit card requires understanding how different rewards and points work and being aware of your own financial habits.
Burns also points out that you’ll want to be aware of how you use your travel rewards credit card.
“I totally appreciate how important travel is to a lot of people because it’s important to me, but it has to fit into your overall budget,” Burns says.
Now that I have a better understanding of personal finance, I know I can use a rewards credit card wisely and thoughtfully. It won’t be intimidating, and I will have control over its management and oversight.