How to find the money for a summer holiday

How to find the money for a summer holiday

The piggy bank might be a bit depleted, but you still want a holiday. And, judging by the results of recent surveys, you’ll probably find a way to take one.

One way to find the money for a holiday in tough times is to look for ways to spread the cost of your trip.

Instead of forking out hundreds or thousands of dollars in one hit, you can often break it up into chunks over several months, or more.

A handful of travel companies now offer more flexible payment options to clients since the economic downturn, with the likes of Easy Save Holidays among those offering holidays on “lay-by”, allowing customers to pay weekly or monthly instalments. 

It will be interesting to see if other companies follow suit but, in the meantime, there are other ways you can break up the cost of your holiday.

Stretch the travel dollars

One of the most obvious is to plan ahead and pay a deposit on a holiday for next year. The key to making this work is to have a plan to save the remainder prior to the final payment being due to avoid a last-minute panic.

“One of the best ways to do this is to set up a high interest savings account, with an automatic weekly or monthly transfer through your account,” said Alex Parsons, CEO of RateCity.

But if you have less time to play with, another option is to use your credit card, he said.

“Paying with your credit card isn’t all bad and there are some benefits to be had, so long as you have a plan to pay it off within the interest-free period.”

He said benefits can include free travel insurance, when paying for at least part of the booking using the credit card, as well as free flights and merchandise on rewards-based credit cards.

“The way to compare credit card rewards is not to focus on a simple points-per-dollar measure. The more important thing is to look at how the points translate back into real dollar value.”

Simple tips to cut costs

Holidays don’t have to be expensive. In fact accommodation options are no longer limited to expensive hotels and holiday parks, which is good news if you’re trying to stretch out the travel dollars this year.

Families are increasingly choosing to take holidays in apartments over traditional hotel rooms, which are now favoured by one in five guests.

“The space offered by apartments gives families and people who are travelling in a group a more cost effective way to travel,” Simon McGrath, chief operating officer at Accor, told News Ltd.

“The apartment model allows the freedom to design your own holiday but also make sure you can still cater for yourself which makes it a little bit cheaper than your mainstream hotel.”

He said the trend is happening in markets worldwide as peer-to-peer apartment rental sites continue to attract travellers.

Evidently, one such website, airbnb.com, attracts a booking every 2 seconds and in June this year reached a milestone of 10 million guest nights booked since 2008. The San Francisco-based start-up lists more than 100,000 properties in 192 countries including in Australia.

Think it’s weird to stay at a stranger’s home? Then there are many alternative accommodation options for those travelling on a budget with all-inclusive package holidays and cruise holidays offering great value.

No matter how you plan to travel, or how you intend to come up with the money, it pays to do your research because your piggy bank will thank you!

 

Did you find this helpful? Why not share this article?

Advertisement

RateCity

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the ratecity.com.au Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy

Advertisement

Learn more about savings accounts

How can I get a $4000 loan approved?

While personal loans and medium amount loans don’t offer guaranteed approval, there are steps you can take to help increase the likelihood of your application being approved, including:

  • Fulfilling the eligibility criteria (providing ID, proof of residency, proof of income etc.)
  • Checking your credit history (you can order one free copy of your credit file per year, and make sure that there aren’t any errors that may be bringing down your credit score)
  • Comparing carefully before applying (making multiple loan applications can mean having your credit checked multiple times, which can look bad to some lenders and reduce your chances of being approved by them)

Can you set up direct debits from a savings account?

It’s not usually possible to set up a direct debit from your savings account to cover ongoing expenses or bills, as savings accounts are structured around growing your wealth by earning interest on regular deposits, and discouraging withdrawals.

Some transaction accounts allow you to set up direct debits and also earn interest, though you may not enjoy as much flexibility as a dedicated transaction account, or get as high an interest rate as a dedicated savings account.

Can you have a joint savings account?

Yes. Joint savings accounts can be useful for two or more people wanting to combine their savings to meet shared financial goals, including spouses, flatmates and business partners.

Some joint savings accounts require all parties to sign before they can access the money. While less convenient, this extra security can help encourage all parties to meet their shared financial goals.

Other joint savings accounts allow any of the account holders to access the money. These accounts can be convenient for financially responsible couples that trust one another implicitly. 

What is a good interest rate for a savings account?

A good rule of thumb to keep in mind with savings accounts is to look for a rate that is higher than the CPI inflation rate. This number is constantly changing, so check the Reserve Bank of Australia’s page. If you aren’t earning interest above this then the value of your money will go backwards over time.

How to make money with a savings account?

Savings accounts make you money by earning interest on your savings. The more money you deposit, the longer you leave it in the account, and the higher the account’s interest rate, the more interest you’ll be paid by the bank or financial institution, and the more your wealth will grow.

To make sure your savings account makes money and doesn’t lose money, it’s important to maintain a large enough minimum balance that the annual interest earned exceeds any annual fees charged on the account.

How much money should I have in my savings account?

A good rule of thumb when working out a minimum balance for your savings account is to make sure that you’ll earn more in annual interest on your savings than what you’ll be charged in annual fees.

If you’re saving with a specific goal in mind, prepare a budget so the interest you earn on your deposits will help you efficiently reach this goal. Online financial calculators may be helpful here.

Who has the highest interest rates for savings accounts?

As banks frequently change their rates, the most accurate way to know who currently has the highest interest rate is to use a savings account comparison tool.

How does interest work on savings accounts?

The type of interest savings accounts accrues is called compound interest. Compound interest is interest paid on the initial deposit amount, as well as the accumulated interest on money you have. This is different from simple interest where interest is paid at the end of a specified term. Compound interest allows you to earn interest on interest at a higher frequency. 

Example: John deposits $10,000 into a savings account with an interest rate of 5 per cent that he leaves untouched for 10 years. At the end of the first year he will have $10,512 in savings. After ten years, he will have saved $16,470.

What is the interest rate on savings accounts?

As banks frequently change their rates, the most accurate way to look at interest rates on savings accounts is to use a savings accounts comparison tool. When you look at the savings rate check what the maximum and minimum rates are. Often banks will offer you a promotional rate for the first few months which is competitive, but then revert back to a base rate which can sometimes be less than inflation. Ongoing bonus rates are often a safer bet as they will keep rewarding you with the maximum rate, provided you meet their criteria

What is a savings account?

A savings account is a type of bank account in which you earn interest on the money you deposit. This makes it one of the easiest and safest investment tools.

Can I overdraft my savings account?

A lot of savings accounts won’t let you overdraw. Some will allow this feature but you’ll need to apply first. It’s best to read the fine print and check with your lender whether this is a feature they offer. It can be a helpful addition, but as your lender can charge you a fee as well as interest for going into negative numbers, it’s best to avoid overdrafting when possible.

Can you direct deposit to a savings account?

Yes. You can make one off payments or set up regular direct deposits into a savings account. This can be organised easily through online banking or by making deposits in a branch. Talk to your lender to find out the easiest way for you to set up direct deposits.

How do I open a savings account?

Opening a savings account is a relatively simple process. If you’ve found an account with a suitable interest rate, you’ll just need to get in contact with your chosen lender via a branch, phone call or hop online to begin the process. 

You may be required to provide:

  • Personal details, including identification (driver’s license, passport etc.)
  • Tax file number
  • Employment details

How to open a savings account for my child?

Some banks and financial institutions allow parents to open a bank account for their child as soon as it is born, and start depositing funds to go towards the child’s future.

Children’s savings accounts generally don’t have fees, and are structured to help develop positive financial habits by limiting withdrawals, encouraging regular deposits, and earning interest on the savings, similarly to standard savings accounts.