Travelling Iceland on a Budget

We may earn money or products from the companies mentioned in this post.

Iceland is famous for being pricey. It’s a European country with a high standard of living but also an island that needs to import many goods. However, it is possible to stick to a budget when travelling, and we are going to share some of our tips here! Tomiko and I spent a week in Iceland back in June, and we have some Iceland-specific tips in addition to our other budget travelling ideas here.

How we traveled Iceland on a budget:

• We cooked our own meals when possible. Grocery prices weren’t much more expensive than in Toronto, and some things were much cheaper! Skyr, in various flavours, was very affordable and very delicious. Lamb was half the price as what we get in Toronto. There was also a lot of affordable fish and seafood available. One of our favourite dishes that be bought in the grocery store was plokkfiskur! Restaurants are more expensive because staff are paid living wages. Since we stayed in hostels, we had access to good kitchens and were able to prepare our own breakfasts, dinners, and occasionally lunches!

• If you do want to try a restaurant, we have a few recommendations: Sea Baron in Reyjkavik has delicious lobster soup that costs 1500 K per bowl with a loaf of bread and butter. That soup has the most tender, succulent pieces of langoustine, and is located right at the Reykjavik pier! Of course, the famous Icelandic hotdogs are a good budget choice. They are made of lamb and when you order it ‘with everything,’ you get some delicious toppings (raw onion, fried onion, remoulade, and mustard). Another option is Icelandic Street Food, which offers soup (lamb, seafood, and fish) served in a bread bowl. If you order the lamb soup in a bread bowl, they will give you free refills! Also, there were plates of free coconut macaroons and brownies for the taking. Enjoy a big lunch here and then have a smaller homemade dinner!

• You are not expected to tip in Iceland; people are generally paid a living wage, so services are expensive (e.g. restaurants, bus to/from airport. The price you see is the price you get!
• Relax like a local: instead of spending lots of money on the touristy and busy Blue Lagoon, we spent 900 K per person at the local swimming pool; there were indoor and outdoor laned pools, as well as a cold pool, and three temperatures of hot pots. Sauna and steam rooms were also included. Spend all afternoon here relaxing! The locker room (at least, the female one) has a swimsuit centrifuge, blow dryers, makeup mirrors, and free lockers.
• See the local sites: the Reykjavik Zoo was again very affordable, at just 900 K per adult. Here you can see Icelandic animals such as the Icelandic sheep, Icelandic horse, Arctic fox, and harbour seals, if you didn’t venture out of the city. There’s also a nice cafe that has some hot food. If you don’t want to buy the food there, they provide a free barbecue so you can cook a picnic yourself. The dining area also has a panini grill, microwave, and kettle, so you can heat up your own food too. Most of the other visitors we saw were Icelandic families wearing their lopapesa!

• The Botanical Garden, right next to the zoo, is free! It is a beautiful space with wandering paths through a rock garden, vegetable garden, native plant garden, and ponds. A beautiful indoor seating area also has a cafe.
• Buying a sweater: as knitters, of course we recommend buying a real Icelandic lopapeysa that was handknit in Iceland using Icelandic wool. You might find cheaper wool sweaters in some big stores, but often these are machine-knit or handknit in places like China. To ensure you’re getting the real ‘handknit in Iceland’ lopapeysa, head to the Handknitting Association of Iceland shop. Of course, these are pricey. What we did was buy our sweaters directly from the knitter when we went on our road trip! We visited the Erpsstaðir Creamery in the west of Iceland, and they sold handknit lopapeysa for 15,000 K each! While driving throughout the countryside, we saw some farmhouses advertising their handknit sweaters for sale. So if you’re out and about in the countryside, buying directly from the knitter can save you money while supporting the local industry!

• Cheap yarn! You may have heard that in Iceland you can buy yarn anywhere, from the grocery store to the gas station and airport. And it’s true! The famous Icelandic label Istex sells several weights of yarn for about half the price than what we can find in Toronto. We totally stocked up! I think I bought three sweater-quantities of Lettlopi and Plötulopi.

• Luggage: we flew on Icelandic Air and they charge for checked luggage. We used a small suitcase as a carry-on and a backpack as our personal item. With these, we were able to bring everything we needed with no checked luggage. However, since we planned to buy lots of yarn, we brought an empty compact duffel bag which we checked on the flight back to Toronto. If you’re not buying lots of yarn or sweaters, forgo the checked luggage and save money!
• Free walking tours! Follow Me is an organization that provides free walking tours around Iceland. They have two daily walking tours of Reykjavik, one in the old town and one by the harbour. The cost is officially free but of course you should tip the tour guides. This was a great way to learn about Icelandic history, culture, and politics with a funny guide in English!

Other options for travelling Iceland on a budget:

• Camping! Instead of staying in hostels, you can camp. We passed several campgrounds on our drive. While some have all the amenities you might need, others are very basic. There’s also an outfitter in Reykjavik that will rent you tents and everything else you might need. Someone we know even went camping in Iceland in November to see the Northern Lights. If camping in a tent isn’t for you, you can also rent a campervan or RV. Travelling with friends or family can help cut the cost and allow you to travel Iceland on a budget.

How have you traveled Iceland on a budget?