Tips for Accumulating Funds for a Vacation in Kazakhstan: Strategies, Potential Risks, and Expert Guidance from a Financial Advisor
Saving Up for Your Holiday: A Step-by-Step Guide
Want to jet-set without breaking the bank? Here's how to save those travel dollars smartly.
Where to Stash Your Vacay Cash?
Keeping cash is easy but risky. It loses purchase power due to inflation and is susceptible to theft or loss. Stashing your funds on a debit card offers flexibility, but the temptation to dip into your savings for daily expenses can be high.
Bank accounts and flexible deposits are your best allies for short-term savings. These options let you earn interest and safeguard your savings from depreciation. The average effective interest rate on such products in Kazakhstan stands at 13-16% per annum.
While investing in stocks, bonds, or precious metals may seem tempting, these instruments are more appropriate for long-term goals due to their volatility.
How Much to Save?
Financial advisor Aaman Alimbayev suggests a rule of thumb for a vacation budget: around 5-10% of your annual income. For instance, if you make 8 million tenge yearly, your vacation budget should be between 400,000 and 800,000 tenge. If you're spending 15-20% of your income on vacations and lack reserves for unexpected expenses, it's time to reassess your financial priorities.
Savings Strategies
Planning your holiday in advance? Take advantage of early booking programs, where part of the amount is paid upfront, and the rest is paid in installments. This way, you lock in the tour or accommodation cost and protect yourself from price fluctuations.
Setting up automatic transfers to a savings account is another effective method, as it lessens the likelihood of early spending. If you struggle with self-control, consider placing funds in a deposit with no partial withdrawal option.
Budgeting for a Family Getaway
Here's an example of how a family of three can save for a trip to Vietnam, Thailand, or Egypt:
Family: 3 people (mother, father, child)
Total monthly income: 900,000 tenge
Vacation destinations: Vietnam, Thailand, or Egypt
Average vacation cost per person (7 days): 400,000 tenge, total cost of tickets: 1,200,000 tenge
Desired amount for additional expenses: 500 USD (exchange rate: 517 tenge)
Percentage of income that the family can save monthly: 10%
Option 1: Simple Savings (without a deposit)By setting aside 90,000 tenge monthly, the family can save the required amount in 16 months.
Option 2: Savings Account with a 15% annual interest rate (with monthly capitalization)By depositing monthly savings (90,000 tenge) with 15% annual interest (or 1.25% monthly) with monthly capitalization, the family can accumulate 1,458,500 tenge in just 15 months.
Got a Hiccup? Don't Panic!
Unforeseen circumstances inevitably arise. Inessa Budaeva, an employee from a tourism company, advises maintaining flexibility in such situations. While credit cards offering grace periods can help, it's crucial to consider them an exception rather than a rule. After all, a holiday should bring joy, not generate debt pressure.
Previously, we covered how Kazakhstanians should take vacations and their entitlements to days off and vacation pay by RK laws.
I should consider opening a bank account or flexible deposit for personal-finance purposes, as they allow me to earn interest and safeguard my savings from depreciation while I'm saving up for my holiday. In order to budget effectively for a family getaway, I can set a savings goal based on a rule of thumb suggesting around 10% of my annual income for a vacation. For example, if my family earns 900,000 tenge monthly, we can save for a trip to Vietnam, Thailand, or Egypt in 15 months by depositing monthly savings with a 15% annual interest rate.
