How to save for a vacation: 14 tips to make a dream trip happen

People can save for a vacation by assessing the cost, making a monthly savings goal, and using a budget system to track progress. Cutting non-essential spending and creating a new savings account with scheduled automatic direct deposits can make it even easier.

Taking a vacation can seem unattainable due to the cost of travel, which has increased by 19% since 2019.¹ But learning how to save for a vacation — paired with planning and financial discipline — can help make it achievable.

By setting a realistic budget, using savings strategies, and selecting cost-effective travel options, it’s possible to reduce financial stress and enjoy a memorable trip.

Read on to learn how to save for a vacation, manage a tight budget, and use tools to split and pay back shared costs among friends and family.

1. Set the vacation budget

First, calculate the expected cost to set the target savings goal. Keep in mind, each vacation will have different various costs depending on the destination and activities.

In general, expect to budget for:

• Transportation: Costs for flights, car rentals, fuel, public transport, and other travel-related expenses
• Accommodations: Expenses for hotels, vacation rentals, camping sites, or other lodging options
• Activities: Costs for excursions, tours, entry fees, and other planned activities
• Food: Dining out, groceries, snacks, and drinks
• Additional costs: Costs such as travel insurance, tips, service charges, and emergency funds

Overestimate vacation spending

Add between 10% and 20% to the planned budget to accommodate unplanned expenses and emergencies.

Vacations can put people in a state of mind that encourages them to spend extra money. Leave room for souvenirs, nice meals, and unexpected travel expenses.

Consider creating an easily accessible emergency fund and don’t use it for planned expenses.

Set a date and calculate a monthly savings goal

The vacation date should leave enough time for a reasonable savings goal. Start with 6 or 9 months and see if the budget is manageable, then push the date further out if it isn’t.

When setting a date, factor in ticket and accommodation prices that change with time. They often increase as the date approaches, so paying for them as soon as possible is a good idea.

Take the total vacation budget and divide it by the number of months between now and the date.

For example:

• Budget: $5,000
• Months until travel: 10
• Monthly savings needed: $500

Now that the monthly goal is specific and clear, it’s time to learn how to save for a trip using a monthly budget.

Use this fillable worksheet to make a savings plan.

2. Create a monthly budget and use a system

Assess whether the monthly savings budget is manageable. If not, change either the details of the vacation or the timeline.

A budget system can help keep accountability and meet goals while saving for a vacation.

50-30-20 Budget

The popular 50/30/20 rule works like this:

• 50% of income goes to essential expenses
• 30% goes to discretionary spending
• 20% goes to saving

To save efficiently, put as much of the 30% as possible toward vacation costs.

60-30-10 Budget

This budget is helpful for people who have higher fixed costs. 60-30-10 budgets work like this:

• 60% of income goes toward essential expenses
• 30% goes to discretionary spending
• 10% goes to saving

Someone saving for vacation on a tight budget can use this method to temporarily focus on short-term goals.

Again, as much of the 30% discretionary spending as possible should go toward the vacation.

Biweekly budget

People who struggle to stick to a budget may want to consider a biweekly budget instead of a monthly one.

Each time a paycheck comes in, budget the funds right away. Start with the essentials and then allocate everything left over based on current priorities.

Remember to account for bill timing and leave funds in reserve if necessary. Here’s an example of a biweekly budget that makes this consideration:

3. Consider a savings account for vacation savings

Savings accounts are critical for effective savings plans. They let people set money aside and earn interest on account balances, which can help meet savings goals.

There are different types of savings accounts with different rate models.

For example, high-yield savings accounts generally offer higher rates than regular bank savings accounts.

Some savings accounts offer a “bucket” feature to set funds aside for different purposes. Buckets are organizational tools inside accounts that let people earmark money for specific purposes.

This is a great option for people who prefer to have only one savings account. However, having multiple accounts can be helpful for people who prefer to separate their savings to avoid the temptation to dip into them.

4. Set up automated savings contributions

Setting aside money automatically from regular paychecks can make it easier to save.

For instance, with a PayPal Savings account², users can set aside their funds for different goals (i.e., a "Cancún trip" bucket) and automate contributions toward this goal.

5. Cut back on non-essential spending

Sticking to a budget helps meet short-term savings goals while also prioritizing long-term financial health. Non-essential spending is a good step to cut back.

Try not to cut back on long-term savings to save for a trip and stick to a budget. It's possible to eliminate non-essential spending from budgets first by:

• Limiting takeout and restaurants to a specific number (once a week, once a month, etc.)
• Choosing budget-friendly family activities like parks, hiking, libraries, and museums.
• Uninstalling delivery apps to remove the temptation.
• Thrifting instead of buying new.
• Pausing or cancelling subscriptions.

Small sacrifices over a period of time can add up to a dream vacation.

6. Use budgeting apps and tools

Budgeting apps, spreadsheets, and digital wallets can help track income and expenses, identify potential areas to cut back spending, and allocate funds for savings. Saving apps and expense tracking guides can be helpful for staying on track.

For example, a budgeting app lets people enter a goal and automatically track spending to visualize their progress. This can help identify areas to cut back.

9. Pay debt before saving

Debt puts significant pressure on monthly budgets because it demands minimum payments and accrues interest.

In the long term, it can be helpful to pay off debt before saving because the accrued interest on debt balances can eventually exceed the savings account benefits.

People who have debt may need to factor payments into their savings timelines.

10. Track spending and monitor progress

The most important part of saving is making regular, sustainable progress. Small efforts add up over time.

After the first month, look back at the budget and assess the level of success:

• Was it easy to meet savings goals?
• Were any expenses surprising?
• Did spending reflect the budget plan?
• What adjustments would help next month?

Doing this every month can help ensure the vacation savings plan stays on track.

11. Maximize travel rewards and deals

Using travel rewards to help with summer vacation costs can significantly reduce the overall cost of a trip.

There are several ways for travelers to earn points or cash back rewards on travel-related expenses:

• Credit card rewards
• Loyalty programs
• Digital wallets

For example, travel points on credit cards are rewards earned for eligible purchases. When the cardholder accrues enough points, they can redeem them for things such as flights, accommodation, rentals, and other travel-related expenses.

Another way to earn rewards is via cash back apps that offer rewards for spending money with travel-related companies or airlines. For example, PayPal users can get access to travel-related deals and offers in the Travel category in the PayPal app.³

The way points and cash back are earned and redeemed will vary depending on the program.

12. Reduce vacation expenses

This time, it’s the destination and the journey that count. Choosing where to go can significantly impact the cost of a vacation. Regional price differences for accommodations, activities, and dining can help travelers choose their destination if they're seeking a low-cost trip.

Here are some examples of less expensive trips:

• A trip to Southeast Asia could be more cost-effective than a European vacation due to lower local prices.
• Traveling during local off-seasons can result in substantial savings on flights and accommodations.
• Traveling during common national holidays and weekends can be more expensive. Try booking flights on weekdays and avoid holiday weekends.

Flexibility can help stretch the vacation budget further, allowing travelers to focus on the experience and avoid expensive distractions.

Tips for saving money while traveling:

1. Cook and shop at grocery stores instead of dining out for every meal.
2. Use public transportation, like buses, trains, ferries, and other local methods instead of taxis and ridesharing apps.
3. Pack light to avoid baggage fees and make traveling more convenient.
4. Look for free or discounted activities, such as local festivals, parks, museums with free admission days, and self-guided walking tours.

13. Travel as a group and split costs

Going on a vacation with friends, family, or other families can help reduce the overall cost.

Using secure peer-to-peer (P2P) payment methods can simplify the process of splitting costs, making it easy to send and receive payments between friends and family.

Here are some common examples of shared vacation costs:

• Vacation rentals: Dividing the cost of a shared vacation rental can be easily managed. One person can pay the rental fee upfront, and the rest can transfer their share via a P2P service.
• Group meals: When dining out as a group, one person can pay the bill, and the others can quickly transfer their portion to the one who paid.
• Activities and excursions: Whether booking a group tour, a shared boat ride, or a joint excursion, splitting the cost becomes seamless with P2P payments.

The process of splitting costs usually involves selecting the person to send or receive the payment, entering the amount, and confirming the transaction. Different platforms may have varying steps, but the overall process is typically quick, easy, and safe.