Being at the bottom of the workplace totem pole means young people typically don't earn enough to easily afford to take summer vacations, but that doesn't mean they have to stay home.
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Gen Z and millennials, whose desire to travel this summer is outstripping their incomes, should follow the standard personal finance advice for anyone looking to cut spending and increase savings: Cut back on subscriptions, stop food delivery, start a side hustle, and, of course, swap out those $6 lattes for a countertop coffee maker.
But saving up for a trip offers unique opportunities that those saving for a down payment or a new refrigerator don't have.
Save money while spending with the right travel card
Many Gen Zers and some Millennials may be completely unaware of credit. For them, the first step is to learn how credit works and how to use it responsibly and to their advantage. If you can do that, using money in the bank to fund a summer trip can add significantly to your savings much faster than saving for a vacation on your own, like carpooling or canceling your Netflix subscription.
There are four main ways to save money on your vacation using credit cards without spending your own cash: Collect points, miles, loyalty rewards, and bonuses.
Use your points card to get free money to spend
As a way for young adults to save for travel, paying for purchases with a credit card may not seem like a smart idea, especially if you're new to credit cards, but using travel rewards can help you save while you spend.
“Don't underestimate the power of a travel rewards credit card,” says Bethany Hickey, personal finance expert at Finder.com. “Cash back rewards on travel purchases can really add up. Five percent on a $1,000 flight equals a savings of $50.”
Cards that pay rewards with points tend to have the simplest and most flexible terms. For example, the Bank of America Travel Rewards card pays 1.5 points per dollar spent anywhere and never expires as long as your account is open. If you pay your statement balance in full each month to avoid interest, you can save money on travel with every purchase.
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Choose a travel card that will help you earn miles and save more cash
Another way to use a credit card to fund your travel without spending any of your own money is to choose a travel card with a miles-based rewards structure. While they're usually less flexible, they can help you save up more for your travel than many points-based programs.
For example, the Capital One Venture Travel card suite pays you 1.25 miles per dollar and up to 10x miles on travel purchases like hotels and rental cars booked through Capital One, allowing you to build up a travel fund while you spend on travel.
If you're a fan of a particular airline, apply for an airline-branded card
The third option is to choose an airline and apply for a card with that brand, which locks you in to one airline but allows you to accumulate loyalty points and double the miles or points you earn on third-party cards.
For example, the Delta SkyMiles American Express Card earns you 2 miles for every dollar you spend at restaurants, takeout, and on Delta purchases, and you can save 15% when you use those miles to book a Delta flight.
Earn a bonus that covers most or all of your travel expenses
Finally, you can open a card with a sign-up bonus to help you save for your trip. For most Gen Zers, there's no easier way to start saving money faster. With the right card, you can pay for your trip in full or nearly in full.
“There are plenty of credit cards that offer sign-up travel bonuses on your first few purchases,” Hickey says.
One of the most attractive incentives is the Chase Sapphire Preferred. Don't spend more than you normally would to get the bonus, but if you plan to spend $4,000 within three months, you can put that amount toward the card and get a sign-up bonus of 75,000 points. That's more than $900 you could put into a savings account when you book travel with Chase.
But that doesn't mean you shouldn't supplement the bank's contribution with your own money.
Open a dedicated savings account
Your new travel card means your bank will cover your vacation expenses with every purchase, so double down on your summer savings by setting up an interest-bearing account just for travel.
“Establish a dedicated travel fund and set up automatic transfers from your primary account to a high-yield savings account,” says David L. Blain, CFA, CEO of BlueSky Wealth Advisors. “Small, consistent savings can add up over time. Also consider using a budget tracking app to identify and cut unnecessary expenses, then use the savings to fund your trip.”
No need to open a new bank account, just create a dedicated bucket in your existing account to help you reach your savings goal faster. The faster you reach your goal, the faster you'll get to your vacation destination.
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This article originally appeared on GOBankingRates.com: 5 Ways Gen Z and Millennials Can Save for Their Summer Travel Goals
