Summer holidays can easily lead to escalating expenses. Some people even risk going into debt, warns the Swedish Financial Supervisory Authority (Finansinspektionen).
“The biggest risk is taking small loans to finance consumption now with money you don’t actually have,” says consumer protection economist Moa Langemark.
A recent survey by YouGov, commissioned by Nordnet, shows that one in eight Swedes aged 18 to 29 borrows money for vacations. Another survey from Länsförsäkringar reveals that one in twelve families with children finances their vacations with an unsecured loan.
“We find it very difficult to imagine the situation that will come later in the fall, which tempts us to consume now and defer the payment to the future,” says Langemark.
“The most important thing is not to put yourself in a situation where you can’t pay back the money. Instead, choose a vacation that fits your budget.”
Even though the economy is slowly improving and interest rates are declining, it’s crucial to be cautious, she emphasizes.
“It’s very difficult to predict what will happen in the future. Putting yourself in a situation where you can’t repay the loan is a huge disservice to yourself.”
At the same time, Langemark acknowledges the need for sensitivity to the more pressured situation families with children face today compared to the past.
“You shouldn’t make your children anxious, but you can have a conversation about personal finances to help them understand the value of money and explain that you can’t afford that overseas vacation,” she says.
Her top tips to avoid an economic hangover in the fall are to create a vacation budget and avoid costly small loans.
“One simple way is to look at the expenses from your last vacation and budget based on that. Planning and setting conditions so it doesn’t lead to an unpleasant debt situation in the fall is crucial.”
Financial Tips for Vacations
- Avoid costly small loans. An unsecured loan of 15,000 SEK, for example, could end up costing over 40% more.
- Create a budget for the vacation. Calculate based on your previous vacation expenses.
- Avoid unnecessary travel and additional insurance. Often, cancellation protection is included in your bank card, and there is usually some travel coverage in your home insurance.
- Check card and exchange fees. When paying by card abroad, it can be cheaper to pay in the local currency rather than in Swedish kronor. It’s often also cheaper to withdraw money on-site than to exchange it beforehand.
- Long-term tip for saving up for vacations: Keep your savings in an account with a deposit guarantee and the highest possible interest rate.
- For funds, review the fund fees to ensure that not too much of the returns are lost to fees.
Source: Moa Langemark, Swedish Financial Supervisory Authority
4o
SpotlightSweden