How Our Family Saves for a Vacation

Tawnya Hallman |

Best Money Decision: HISA

One of the BEST things my husband and I ever did to make a huge and positive impact on our financial life was to open a high interest savings accounts (HISA). Having a separate account with a specific goal made all the difference for us. 

How to Choose a HISA

We chose EQ Bank because we had read great reviews and because it offered one of the highest (non-promotional) interest rates. We've had accounts there for about 5 years and so far, have had a great experience. And yes, the accounts are protected by the CDIC

There are plenty of banks that offer HISAs though, so choose the one that works for you. The interest rate you secure is less important than actually opening a no-feehigh interest savings account that's separate from a regular chequing account.

Processing Delays

One heads up about some HISAs, which I think just applies to online banks, is that transferring funds between accounts (chequing at one bank to savings at EQ Bank for example) can take 3-5 business days to process. In most cases this really hasn't been a big deal for us, but it was once, and it still bugs me. If online banks could eliminate the funds transfer delay, I'd have no complaints.  That said, I personally prefer a delay and higher interest versus the other way around.

No FX Fees

There's one more thing that I like about EQ Bank (I swear they aren't paying me!), especially for vacations. They have a bank card that you can link to one of your HISAs.

We link it to our Vacation Savings account and load money onto it before we travel.  From there, we can use it when we travel just like a debit card, even outside of Canada and there are no FX fees.

FX fees are applied on credit cards with charges in a foreign currency. EQ Bank offers FX fee-free spending. Anything that is easy to use and keeps more money in our pockets is a bonus in my opinion. 

All that said, other banks might offer similar options and perhaps even better ones, so it's worth shopping around.

Game Changer: Automatic Savings

Back to our Vacation Savings account. The game changer for us was when we started sending money to this account automatically every month. Once the money was removed from our budget, we didn't miss it. We adjust the amount we save each year depending on our financial priorities.

When I share this savings idea with others, they often reply that they can't afford to do that. Yet somehow, they still go on vacations. The reality is most people go on vacation whether they have the money saved or not. Eventually it MUST come out of their budget; usually in the form of credit cards payments.

This method of saving ahead of time puts people in a much better financial position AND it's cheaper because there are no interest payments to make.

Withdrawing money in small increments from a chequing account to a HISA, over a long period of time makes it more manageable from a cash flow perspective and ultimately, avoids a cycle of debt. From my perspective you have nothing to lose. Worst-case scenario, you stop, pause or lower the automatic savings to accommodate your cash flow needs.

Guilt-free Vacations

The lightbulb went on when friends invited us on a 2-night family trip to Niagara Falls (if you've never been, it's crazy expensive!) and we didn't even have to think about whether we could afford it. WE HAD THE MONEY AND COULD SPEND IT GUILT-FREE! 

Having the money ahead of time made the trip so much more enjoyable too. We knew what our budget was and when we were there, we said "yes" to many more activities than we would have if we didn't have the money set aside. For a money-conscientious family, this gave us a lot of extra enjoyment. This was a perk I had never considered.

Since then, we've been on several family vacations, and we've paid for every single one in full. Initially we pay for our trips using our credit card to collect the points. Then we transfer funds from our Vacation Savings account to our chequing account to pay off the credit card immediately.  Earning loyalty points and paying it in full is like the cherry on top for me.

How to Have a Guilt-Free Vacation  

Here's how to open your own Vacation Savings account and take vacations guilt-free:

Step 1: Open a HISA account at any bank. 

  • Nickname it "Vacation” for good measure or any other name that you find motivating like the destination you're saving for. (You can change the name of your account anytime). 

  • Shop around for a good rate at a bank you feel comfortable using. The rate you get is less important than opening the account for yourself.
  • Don't fall for promotional rates that offer a high rate for 3 months and then get reduced significantly.

Step 2: Set up automatic payments (weekly, bi-weekly or monthly).

  • Link your chequing account to your new HISA and set up automatic transfers on whatever schedule suits you best. 
  • Decide how much you want to save and by when and do the math. For example: $5000 in 12 months = $417 per month.
  • Even if you don't have a vacation planned, start saving so you'll have the money when you need it. This allows you to be spontaneous too!

Step 3: Book your vacation and pay for it with your saved money.

  • Congratulations & have a great trip! 


Extra Vacation Savings Tips

  • Setting up a separate account outside of your chequing account is the key to saving. It removes the temptation to spend it. 

  • Consider making extra deposits using a portion of a tax rebate, cash gift, unexpected money (like the climate action incentive) or otherwise. This could potentially allow you to lower the amount you need to save each month, freeing up cash.

  • This might sound silly, but make sure you NAME your account with your goal. For example: vacation, Barbados, Italy, Japan…whatever you like. Naming it reminds you of why you’re saving, which can be motivating.

  • If you pay your credit card in full each month (this is a must!), consider using a travel rewards card. This will help lower travel fees, so you won’t need to save as much.

  • If you take regular vacations, make saving for them an ongoing part of your budget. You won’t notice the missing cash and you’ll be thrilled when you’re ready to book a trip.

Want help? Book a call and we will walk you through the steps, help you figure how much you can afford and more.