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If the pandemic forced you to ground your travel plans this year, you may have extra cash sitting in your bank account. Should you leave your unused travel budget in a savings account? Put it in an emergency fund? Pay down debt? Invest it? Your answer will depend on your goals and your current financial situation, but these are a few things you may want to consider.
Keep it in savings. Still planning to take your trip within the next year? Keeping the money in a savings account may be your best option. It may not earn as much as it would if you invested it, but since you'll likely need the money soon, you may not want to risk possible short-term loss from potential market swings.
Put it in your emergency fund. In addition to grounding travel, the pandemic has caused additional financial uncertainty for many people, highlighting the importance of an emergency fund. Consider using your unused travel funds to start or build up yours. We generally recommend having three to six months of living expenses in cash as an emergency fund, but even smaller amounts can help you stay financially secure in an emergency.
Pay down debt. While it may not bring the immediate rush of joy a vacation does, there’s nothing like paying off debt to relieve some stress, especially if that debt has a high interest rate. Start with high interest rate debt first, especially if it has a double-digit interest rate, like most credit cards.
Invest it. If you aren’t planning to travel within the next few years, and you have enough emergency savings, you could earn a higher return, over time, by investing the cash. All investments come with an aspect of risk, so there is the potential that the money you need may not be there when you need it. Make sure to balance your mix of stocks and bonds for your goal, whether it's a long-term goal, like retirement, or a shorter term goal, such as a future trip. Knowing your comfort with risk and when you want to use the funds will help determine the right balance for your goals.
For more detail about which strategies might be right for your personal situation, talk to your financial advisor.