Why we recommend having a separate holiday account
At Bounce Financial, we are big on automating your finances. We think that a good budget shouldn’t be hard and if every day you need to consider whether something fits or doesn’t fit within your budget, you’ll soon quickly tire of that way of living.
But what was this you said about holidays?
One of our steps in automating your finances is recommending you have a separate account for holidays. We do this by working out how much you are assigning to your holiday account each year and helping you to set up a fortnightly (or how often you get paid) direct debit into this account. We do this for a number of reasons:
- The first reason is that holiday money can make up quite a large portion of a family’s finances and by having it separate, you can be clear about how much money is set aside to pay bills and how much money is set aside for fun things.
- The second reason is that doing this makes sure you go on a guilt-free holiday!
Too often, we don’t plan for holidays and when we need them (and we do), we find ourselves reaching for our credit cards to pay for them. This creates a terrible cycle where we are trying to save for next year’s holiday at the same time as paying off last years. This is a huge trap.
Where should I invest the money I’ve saved?
We generally recommend that clients keep this money in a high interest bank account.
The money can alternatively be kept in an offset account if you have a mortgage but this requires a little more work on your behalf to make sure that money is clearly marked as separate.
We all like to take holidays differently. Sometimes a holiday might just be a couple of extra weeks at home or it could be a once-in-a-lifetime trip to Italy, either way, you’re going to need extra money around to pay for it. By setting up a holiday account and automating a direct debit, you remove the stress of this from your life.
This post is from our resident Financial Planner Ben Brett, check out his details in the About Us section.
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