Nearly two-thirds of Americans pay for vacation with savings – How to build your fund

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Despite the constant news about Americans spending excessively on their credit cards, when it comes to travel, they seem to prefer using their savings. That’s according to an April 2022 GOBankingRates survey, where 62% of respondents indicated using savings instead of a credit card or other source of financing to cover their travel expenses. This is a smart move because getting into debt just to go on vacation can lead to long-term financial consequences. If you’re looking for some help building your travel fund, take a look at these tips that can help you save for a good vacation while avoiding getting into debt.

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Savings for travel is a good strategy, but the best way to ensure savings is to create a separate account dedicated exclusively to your travel fund. Most Americans have multiple savings goals, from retirement to college funding to emergencies and more. If you keep all this money in one account, you will likely use it for other purposes. You don’t want to be in the position of “borrowing” from your retirement savings to fund a vacation, just as you don’t want to withdraw emergency money from your travel savings. Keeping your accounts separate is also a good way to track how close you are to meeting each of your individual savings goals.

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Set up automatic transfers

Saving is inherently difficult for most Americans. While most people want to save as much as possible, the realities of everyday life often provide excuses for getting in their way. If you are intent on building as much of your travel fund as possible, you should seriously consider setting up automatic transfers. With automatic transfer, you don’t have to worry about losing your deposit in any given week or month. Perhaps most importantly, you will protect your travel savings from impulse spending or using the money for other purposes as it will be automatically deducted from your checking account without even thinking about it.

Deposit all winnings

A sudden payment is any type of money you receive that is either not what you expected or is somewhat out of the ordinary. A year-end bonus, for example, qualifies as a windfall, as does an inheritance or significant tax refund. Anytime you receive an unexpected payment, immediately transfer it to your travel fund before you have the temptation to spend it. Windfall gains can be a great way to quickly increase your vacation savings fund.

Use Round-Up . accounts

Another good way to transfer more money to your travel fund is to use an app that pools your purchases and deposits the extra amount into savings. Let’s say you buy a cup of coffee for $3.69, for example. The rounding app will deduct $4 from your card, with an additional 31 cents deposited into your travel fund. While this may not sound like much, these small amounts can build up quickly. Add your other daily purchases and you may end up hoarding a few dollars each day. By the end of the year, you may be able to save $1,000 or more in your travel fund without even noticing.

Make your travel box bigger than you expect

One of the best ways to make sure you don’t run out of a travel budget is to make your savings goal bigger than you think you need to. Most travelers tend to overspend while on vacation, so to avoid getting into debt, add at least 10% or 20% to what you think you’ll need. You can achieve this in many ways, from saving more per pay period to delaying your travel by a few months to increase your savings.

bottom line

Although there are many ways to finance a vacation, having enough money before you travel can prevent stress and allow you to enjoy a guilt-free vacation. Nobody wants to come home from vacation staring at a huge pile of debt, so put these specific processes in place early so you can constantly refill your travel fund.

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This article originally appeared on Summer Travel 2022: Nearly Two-Thirds of Americans Pay for Vacation with Savings – How to Build Your Fund

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