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A graduation trip is something that many university fresh graduates look forward to. It's a chance to take a break after all the studying to see the world before embarking on life's next chapter.

Europe is one of many popular holiday destinations that university fresh grads may aspire to travel to without much thought. Whilst it's exciting to ponder over the various destinations, the cost and how to pay for such a trip is a key consideration for travellers on a typical student budget.

If you don't have a lot of savings, how would you choose between Europe and Cheung Chau?

Graduation trip - Europe
Graduation trip - Cheung Chau

Don't let your graduation holiday be the start of a debt-building journey

Some graduates believe that they should seize the day and cast aside all caution for their dream destination. Such holidays are likely to be paid for with credit cards, and with the intention to repay the debt upon commencement of work. However, this usually ends up in the pile of debt that accumulates along with a new working lifestyle.

A working person will encounter a different spending pattern without the benefits of concessionary student discounts. Some new financial-related considerations include investing in work attire, setting aside allowances for parents, repaying of student loan, setting aside MPF contributions and tax reserves, etc. Monthly expenses are likely to increase significantly.

In most cases, the annual interest charge for overdue credit card balance is more than 30%. If you don't pay your balance in full by the due date, you will have to pay a high monthly interest. Additionally, all new transactions, including existing interest-free instalments and autopay arrangements by credit card will be charged interest immediately. A poor repayment history will affect your credit score and future loan applications.

Plan your trip early

Funding your graduation trip with a credit card is rarely a good option. Instead, you can set up a savings plan and work towards your goal. Plan your trip early and get as much information as you can on air tickets, accommodation, meals and local transportation of your desired destination to calculate the total cost. For instance, if you need HK$20,000 for the trip, you should plan to save HK$2,000 each month at least 10 months in advance before your holiday. Also, check with friends who have recently been to these destinations as it will give you a more accurate estimate of expenses.

Consider how you can keep expenses low such as scouting around for the best air ticket offers, finding a trip companion to share accommodation costs, etc. Don't forget to pay attention to currency fluctuations because a sharp appreciation of the destination currency may mean a more expensive trip. One way to manage currency fluctuations for example, is to purchase that foreign currency in small and fixed amounts over a period of time to balance out the exchange movements, and reduce the impact on your travel budget. If you are planning to use credit cards during the trip, check with the issuing banks on credit card charges abroad. Don't forget to activate the overseas ATM withdrawal function before you leave Hong Kong if you need to withdraw cash from overseas ATMs. To learn more travelling tips, read Make your travel dollar go further.

Choose a travel destination that you can afford. Prudent money management and good savings habits will allow you to enjoy your holiday without financial worries.