When should you change your holiday money?

In theory the answer is simple: when the exchange rate is the best. The only problem with that is that nobody knows when the “best” rate will be reached.

Fortunately there is another approach which works well no matter what the exchange rates get up to and that’s using what’s technically called pound cost averaging. Sounds complicated but what it involves is you buying your foreign currency regularly throughout the time from now ’til your holiday arrives. That way you avoid the ups and downs of exchange rates.

Those ups and downs can be quite substantial too. Over the past year the euro has swung up and down around 12% whilst the pound seems on a steady rise against the dollar (up around 14% over the last 12 months). You might think that it would be better to leave off buying dollars ’til you get an even better rate but we might be at the peak already and just not know it yet.

So how do you go about it? The simplest and cheapest way is to use something like the FairFX card which is free via that link and offers the best rates around. Minimum top-up is only a tenner and you can top-up via standing order which cuts out a lot of hassle. Alternatives are from CaxtonFX (minimum top-up £100) and the Post Office (minimum top-up £50, charge around 3.5%).

Quite a nice way of saving for that next holiday and it should save you money too.

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