With Covid restrictions finally coming to an end, you may be starting to get excited about booking your next big holiday.
However, many people may still be on a tight budget after such a financially turbulent few years, so it may be wise to properly plan how you’re going to save up for some time away.
Read on for some great tips on how to save money for holidays and some ideas of the best places to put money aside for your next trip. You’ll also find some great tips to help your money go further when it comes to heading off, as well as some money-saving tips to cut the costs of any expenses that may come to pass.
Create a holiday budget
Before you start saving money, you should first figure out a budget. This will let you know exactly how much you need to save each month and give you a target to work towards.
You should write down exactly how much you are getting paid each month, and how much you spend on essential expenses, such as bills or loan repayments. Then, you will be able to see how much money you have leftover and be able to figure out the best ways to save.
Figure out any expenses
It may also be wise to plan your holiday and write down any potential expenses you think you may have to pay. These could include anything ranging from flights and accommodation to holiday clothes and excursions – this should give you a rough idea of how much you need to save in total. You may also want to account for any unexpected expenses that may occur.
Set manageable savings targets
Once you’ve worked out how much you need, you may want to set attainable and manageable savings targets. You’ll also need to establish a deadline for when you want to reach your target. Not only will this give you an idea of when you should have saved enough, but setting milestones could also keep you motivated.
Even setting smaller targets is better than nothing as it will encourage you to stick to them – you may even want to treat yourself when you reach one of your targets.
Track your savings
You should also track your progress so you can stay up to date with how much you’ve already saved. Spreadsheets can work for this although, since staring at a wall of numbers in a table can very quickly burn some people out, you may want to think about tracking your savings visually. You could use a thermometer chart, for example, which may end up being a fun way to accurately view the amount you’ve already saved and help you keep to targets.
If you are struggling to find enough money to save, it may be worth trying to cut back on unnecessary monthly spending. Eating out at restaurants less or halting monthly subscriptions that you don’t use anymore could be a good way to curb spending and free up more money for your holiday.
Set up a standing order
Saving money can be a real challenge for some people – sometimes the urge to spend your money before putting it away can be too much, especially just after you’ve been paid.
It is for this reason you may want to set up a standing order from your main current account to your savings account. The money you need to save every month will be automatically transferred to your holiday balance without any input from you.
Since it can be difficult to juggle your finances and remember to transfer money, a standing order means you can rest easy since it’s all done for you automatically.
Better yet, make the automatic transfer happen on the same day you get paid. This way, it won’t be sitting in your account waiting to be spent, totally alleviating any temptations.
This is one of the better ways to develop good savings habits, as it requires very little effort from the saver. All you need to do is set it up and the rest is done for you.
Work out where to save your money
Deciding where to save your money is the next thing you should figure out. There are a wide variety of choices when it comes to savings accounts, each with its own benefits. It’s important that you decide which one best suits your needs when you’re saving for a holiday.
When it comes to normal savings accounts, you have the choice between notice or easy-access accounts.
Savings accounts with a notice period typically offer slightly better interest rates than easy-access accounts, but you are required to inform your bank when you want to make a withdrawal. Although this may make things slightly more complicated, there’s a chance it won’t be an issue for you if you plan far enough ahead.
Easy-access savings accounts, however, allow you to withdraw your money whenever you see fit. Just remember that the interest rate you receive will typically be lower than an account where you have to give notice. If you aren’t the best at planning ahead or are forgetful, an easy-access account may suit you better. They are also flexible and normally let you save smaller amounts on a regular or ad hoc basis.
Cash ISAs are savings accounts that are completely free from Income Tax and Capital Gains Tax (CGT). Although there are a couple of options to choose from, only one is really fit for purpose when it comes to saving for a holiday.
Instant-access Cash ISAs would most likely be your best choice for a holiday fund – they allow you to withdraw your money whenever you need it. This flexibility is exactly what you’re looking for from a holiday savings account; it means you don’t have to plan around a specific withdrawal date.
It is worth keeping in mind, however, that you can only deposit up to your yearly ISA allowance of £20,000 (as of 2022/23), so if you were planning a more expensive holiday, you may want to look into a different type of savings account.
Premium bonds are a government security where you’re entered into a random lottery in which you have the chance to win varying amounts of money.
When you purchase Premium Bonds, you are entered into a prize draw. The smallest prize is £25, while the largest is a staggering £1 million. You should keep in mind that the odds are not in your favour when it comes to winning one of the prizes; even the odds of winning the lowest prize of £25 are 1 in 34,500.
You can withdraw money held in Premium Bonds whenever you wish, so you can access your cash relatively easily when you come to book your holiday.
You can hold up to £50,000 worth of Premium Bonds at any given time, and your money is completely protected from Income Tax and CGT.
A jar at home
This may give you memories of saving when you were a child, but even starting small and putting any spare change in a jar at home can make a big difference. Something is better than nothing, after all.
This is a great way to build up any excess money you have lying around or rattling in your pockets. While this may not seem as though it would have much of an impact on your holiday fund, if you saved just £5 a week in your jar, you would have earned £260 in a year’s time.
Saving in a jar could also be a fun way to watch your savings grow since you can actually see the jar fill up. You could even ceremonially smash the jar when it is full – just watch out for glass!
Peer pressure is usually seen as a bad thing, and rightfully so, but it can also be a useful tool when you are saving.
Since a lot of self-control is needed to save money, it could help to find a friend and get involved in each other’s savings progress. Even if your friend is saving for something other than a holiday, it could still motivate you to know that you’re both heading towards the same goal.
If you encourage and support each other, it could help you stick to your targets and make sure you’re both staying motivated. It may also end up saving you some money in the long run – if you were planning on meeting them for drinks or a meal, you could instead have a cheap night in together.
Automatic savings apps
Automatic savings apps are smart new services that aim to make saving a painless process – especially if you find it difficult to put money aside.
Plum is one of these automatic savings apps. It scans your current account in a read-only mode, then uses algorithms to assess your saving and spending habits, and how much you can afford to save. It then automatically transfers money to your savings account without you even noticing it.
Another brilliant feature of Plum is its “round ups” service. Say you made a purchase for £3.60; Plum would automatically take £4 from your current account and the extra 40p would be added to your savings account. This is a great way to accumulate savings without even noticing it happening.
You may want to use an external savings account when using Plum, as the one it provides gives 0% interest. Alternatively, you can move your money to a 0.25% “interest pocket” with Plum. Bear in mind that a Plum interest pocket has a one-day notice period for withdrawals.
Another good automatic savings app is Moneybox. While it doesn’t have the bank scan algorithm feature that Plum has, it does have an in-built savings account with a slightly better interest rate – instant access at 0.47%. You can also choose whether or not to round up your transactions, which makes saving an interactive and positive experience.
How to save on the cost of a holiday
As well as saving for your holiday, you should also think about ways you can make your savings go further. Luckily, there are lots of ways you can cut the costs you may face, potentially reducing the amount you need to save in the first place!
Look for package holidays
Planning every aspect of your holiday can be complicated. You need to think of everything you want to do, pull the prices together, and work out how much you need in total. If this part sounds like too much fuss, it may be worth looking into a package holiday.
When you book a package holiday, all your expenses are neatly included in one tidy lump sum. This means no more unnecessary stress – everything has been sorted for you.
It gets better though; package holidays can sometimes be cheaper than organising everything piecemeal, so there may be a saving to be made along the way.
It is worth keeping in mind that although most of your expenses are usually covered with a package holiday, it’s still wise to budget for any other costs that may occur that aren’t included in your package, such as extra food and drink, taxis, or souvenirs.
Use flight comparison services
If you plan on flying somewhere exotic for your holidays, the chances are the flights will be one of your biggest expenses.
It is for this reason you should ideally use flight price comparison websites when booking. Services such as Skyscanner are great – they don’t just save you money, they make the whole process of booking flights less of a headache.
Think of these flight comparison sites like an online travel agent; they show you all available flights, the cheapest options, any deals available and the cheapest days to fly – all at the touch of a button from the comfort of your own home.
This may seem like a strange thing to be thinking about when you’re planning your holiday but clearing your browser cookies when searching for flights can go a long way in saving you money.
Cookies are bits of information that your browser keeps about your web searches.
The prices of flights shown on websites are based on demand – the more people that search the flights, the higher the website deems the demand, which then pushes the prices up. This is called “dynamic pricing”.
If you keep searching the same flights to assess different deals, chances are you are only increasing the price. This is why you should clear your cookies – the website will assume you are a new viewer, so prices may be lower.
Keep in mind that clearing your browser history won’t have the same effect on dynamic pricing as clearing cookies.
Consider cheaper travel options
As mentioned before, flights are most likely going to be your largest expense. In fact, depending on where you want to go, you may need to pay a significant sum for flights.
So, you may want to consider choosing cheaper travel options. Trains are usually cheaper than flights and still give you a pleasant and comfortable journey. Of course, the train wouldn’t be an option if you were planning on travelling to Australia, for example.
Or, if you’re feeling brave, you could go for a long-distance coach. While they may not be the most comfortable, you are almost guaranteed to make a serious saving on travel expenses.
Choose off-peak flying times
Depending on how flexible you’re willing to be when it comes to flying, booking flights during off-peak times may result in decent savings.
Flying at more difficult times, such as late at night or early in the morning (which is called the “red-eye”, for good reason) may be more inconvenient, but they tend to be much cheaper.
It is also worth keeping in mind that flights are typically more expensive during school breaks, such as during the summer holiday or bank holidays. If you really want to save money, it may be worth avoiding travelling during these times if possible.
Long-haul flights with one or more transfers may also be cheaper than direct flights.
Book low-cost accommodation
Behind flights, accommodation is most likely going to be your next biggest expense. If you are willing to leave the lap of luxury, however, you could end up saving a nice amount of money on lower-cost accommodation.
Airbnb, for example, could be a great way to find different places to stay that are well within your budget. It may also make things much easier to plan, as you can see exactly what the property is like, you can compare prices with other similar accommodation, and even see reviews to judge cleanliness, value for money, and the location.
Or you could even try staying in hostels, which are typically much cheaper than other types of accommodation. You may be sharing a room with people you don’t know but, for some, meeting people from all different walks of life may be part of the experience.
Assess your travel insurance options
No matter what you are planning on doing while on your holiday, you should ideally get travel insurance. After all, it is better to err on the side of caution when it comes to your health, as you don’t want to have an accident and have to pay for healthcare.
UK Global Health Insurance Cards (GHIC) replaced the European Health Insurance Card after Brexit. They are still free and provide you with the guarantee that you will have access to state healthcare while you are in the EU should the unimaginable happen.
Being prepared can never hurt, however, so it is always worth getting normal travel insurance alongside your GHIC.
Shop around for your travel money
Before exchanging your money, you should shop around for the best exchange rate.
The airport, for example, isn’t the best place to get your foreign currency. This is because it’s essentially a captive market, meaning they tend to offer less competitive rates. You may want to consider changing your money at the Post Office – they offer fairly competitive rates and are convenient.
Another solution to this may be to forget exchanging altogether and choose a bank account that allows you to make withdrawals in foreign currency. Monzo, for instance, offers competitive exchange rates and 0% fees for spending or withdrawing money abroad.
They are simple to use, allow you to easily check how much money you have left, and are much safer as you don’t have to carry around a large sum of cash. It’s worth keeping in mind though that you need to get the card posted to your home address, so you need to organise this well before you travel.
You should always research the area you are travelling to before you leave, as some places (such as many of the Greek Isles) will require you to pay cash. You may also want some extra cash on hand for tips, such as tour operators who have given you a memorable experience.
Consider all-inclusive resorts
If you are fine with the idea of spending a lot of time at one resort, then an all-inclusive holiday may be for you.
Typically, all-inclusive packages require you to pay one lump sum, then you can eat and drink at the resort for “free”.
While this may mean you’re restricted to one place, you can be smart about it and still visit the sights. You could plan your excursions around mealtimes – you could have breakfast at the resort, go out for the afternoon, then come back for lunch to avoid paying for expensive meals.
You should still ideally aim to take money with you, however, as some unexpected holiday costs may still arise, no matter how well your itinerary is planned out.