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So, if you are really wanting to go to Kauai, but feel you can't afford it, begin by surfing . . . not those Hawaii waves (yet), but the www! :)
Lodging - though there are some cheap hotels out there, they don't quite have what it takes. Stay in clean, simple budget accomodations. The best way to stay cheaply is to have a rental - condo or cottage type place that offers at least something of a basic kitchen - at least a fridge and a microwave. Places can go as low as $65 per night and there are some very nice condos for under $100 per night if you do some searching. For example, 100+ rentals for $60-$120 per night. Some place even offer free nights if you spend a week or more. If you are travelling with an extended family, consider a house. You can find places that will comfortably house Grandma, Grampa, their two married kids and spouses, and about four grandchildren, for well under $300 a night for the whole batch.
Now, the other factor involves food - it is pricey, but you can lower your costs to make your vacation more affordable. Cut costs by eating breakfast at your lodging (cereal, fruit, toast, etc.), packing simple lunches and snacks for the day (peanut butter and honey sandwiches, lots of local fruit, water, etc.). Make use of hotel room fridge (and microwave if available). Bring a small cooler for sandwiches , snacks and drinks during the day. Then eat out for dinner. Also, getting a discount card for the grocery store can help reduce your overall costs as well and shopping at the farmer's markets and fruit stands you drive by.
You need a car to get around Kauai - so keep shopping on the internet for the best deal. There are also some local places that advertise on various Kauai websites - they often offer better deals than the major chains, and yet you pick up your car at the major places. Really! Remember, most people don't need any additional insurance and you can save a lot by declining
all the added insurances rental companies try to sell at the counter. Just verify that you are covered by your current insurance or credit card. Ask on the Trip Advisor forums about recent specials that people have found.
As far as activities go, as everywhere in life, most of the best things are free or next to nothing. Take a drive on the Holo Holo Koloa Scenic Byway - it's breathtaking and toll free. You can buy simple snorkel gear, boogie boards and surf boards at Costco and it can be cheaper than renting for the entire trip. By saving on all the other things, you can splurge on that helicopter ride, boat trip or luau.
Speaking of Luaus - if you want a mini-version of one, check out the free hula show at the Coconut Grove Marketplace at 5pm on Wednesday nights. Very cute school of kids put on a show there every week. It's great to take the kids to see other kids dancing - for free!
Anyone who has been to Hawaii knows it's all about the beauty of nature and the culture, not the pre-packaged experiences you pay big bucks for at a resort. All you need is simple accomodations, a rental car, a good guide book and a sense of adventure.
By staying away from the most commercialized, tourist-trappy parts of Hawaii, you can get to know Hawaii's true spirit and that's a feeling that stays with you for life.