Three-quarters of respondents to LearnVest’s 2017 Money Habits and Confessions Survey said they had gone into debt to pay for a vacation, for over $1,000 on average. But Alexa von Tobel, founder and CEO of LearnVest, a financial planning company, explains that there are a few simple steps families can take to eliminate vacation-related debt.
The most important thing to do is “plan well in advance of when you’d like to take the vacation,” von Tobel says. She recommends that the planning process start “about a year in advance” so that families have 12 months to save. But if you particularly enjoy being spontaneous, she says you should “be flexible on timing.” That will net you the best possible deals, especially when it comes to airfare and hotels.
Budgeting is an important way to save money for every expense, but it’s particularly important when it comes to vacation planning. In addition to building trip savings into your monthly budget throughout the year, von Tobel recommends creating a per diem budget while you’re actually on the trip. “Practicing a ‘cash diet’ on vacation can help you stick to your budget on your trip,” she says. Inflate your per diem by 10 to 15 percent to account for small emergencies, then put that amount of cash in an envelope, one envelope per day. Store them in the hotel safe and only take out that day’s cash when you leave in the morning.
Parents can also use the experience of saving up and budgeting for a vacation to teach their kids those skills! “Starting a family trip jar is the best way to explain the process of saving for a vacation,” von Tobel says. “Giving children a way to visually see money accumulating towards a specific goal helps them understand what’s like to save.” Parents can also let their kids “earn” money to spend on vacation by doing extra chores or household tasks.
Once the trip begins, von Tobel says that kids can benefit from a strategy similar to the “cash diet.” “Give younger kids a purse or envelope with a set amount of money, and explain to them that the amount in there is their spending money,” she suggests. That way, they learn what it’s like to budget their own money. Tweens and teens can benefit from a similar strategy using a prepaid credit card.
Vacations are a particularly good opportunity to teach kids some basic financial lessons, von Tobel says, “because they are able to experience and enjoy the reward!”
For more information, visit learnvest.com!