Saving for a holiday

Saving for a holiday

Whether you’ve set your sights on the overseas trip of a lifetime or a getaway to one of Australia’s many beautiful destinations, holidays require research and planning – and a reasonable budget to cover everything from flights to accommodation and everything in between.

While you’re bound to have a great time wherever you go, you can also rack up a sizeable debt if you rely too heavily on your credit card. Ideally, you should save as much as you can before the trip to minimise any debt and to enjoy a guilt-free holiday. This should be a breeze with a bit of pre-holiday planning.

Make a holiday expenses checklist

Sure, while on holidays there are often unexpected expenses but most of your money will be spent on fixed costs and you should have a clear picture of what these are likely to be – depending on where you are going, of course. Before you start saving, draw up a list of all likely expenses to give yourself a savings goal and ensure you save enough.

Your checklist could include a selection of the following:

  • Airfares, train fares, cruise or other transport costs
  • Travel insurance
  • Travel visas
  • Accommodation
  • Car hire at your destination, or local bus and train fare
  • Meals
  • Shopping
  • Entertainment costs (eg museum entries, Broadway shows, sights and activities)

Start saving

“Saving for a holiday, like any financial goal, requires discipline,” says Greg Pride, financial adviser with Centric Wealth. He recommends working out a yearly budget at the start of each year and including any holidays you plan to take, then putting aside a minimum amount each month in savings to cover holidays as well as other expected expenses throughout the year.

A high-interest savings account can help you save for your holiday faster and achieve your goal sooner. You can make regular weekly, fortnightly or monthly deposits and top up your savings with any extra cash you have at the end of the month, or bonus income such as tax returns.

You can compare and apply high-interest savings accounts on RateCity, so do your homework to find the most competitive deal. At the moment, you can get 4.5 percent on a high interest saver. As these rates are generally introductory offers, typically around four months, savers will need to keep an eye on the term and the market to achieve the best outcome.   

Be money smart

If you are flexible about when you travel, you can save thousands of dollars on airfare, accommodation and even meals. Avoid the money-guzzling impact of peak season by travelling during the shoulder or low seasons. Changing your travel dates by one or two weeks can sometimes make a huge difference on cost. But most importantly, be safe and have fun.

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Learn more about savings accounts

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.

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.

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.

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)

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.

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.

Can you set up a savings account online?

Yes. Several large and small banks offer online applications for savings accounts, and there are also online-only financial institutions to consider.

Online-only savings accounts are often less expensive than other savings accounts, though they may not offer the same flexibility, features, or face-to-face service as more traditional savings accounts.

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.

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

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.