Note: The following giveaway is open to Canadians only.
This is a sponsored post written by me on behalf of EQ Bank. As always, all opinions are my own.
The probability you have some money set aside for a future vacation? Medium.
The probability you’ll spend that money before you book your vacation? High.
It happens much too often, I’m afraid: you’ve saved for a hard-earned, long-awaited family vacation, but before you can book the getaway you deserve… the money is spent.
Look, I’m not pointing fingers here. Usually, it’s due to an emergency financial situation, like a leaky roof, car repair, etc. And I understand – life happens. But the thing about withdrawing money from your vacation fund to pay for the unexpected means that you’ve effectively prioritized everything else over your family time together. While, in the short term, it can address an immediate concern and perhaps keep you out of debt, in the long term, forgoing time to rest, relax and recharge can be even more taxing to your health and happiness.
The bottom line: make sure your vacation funds are spent on your family vacation.
Now this year may be a foregone conclusion, but if you happen to have some cash stowed away for next year’s ultimate getaway, here are your options in terms of risk (probability of spending your savings) and reward (earning money on your investment):
1. Under the Mattress (High Risk/ Low Reward) Three words: don’t do this. If you’re still stashing your savings under your mattress, in your piggy bank or anywhere else where it’s immediately accessible, there’s a high risk that your vacation fund will be spent on takeout or something equally trivial. Plus, if your money is just sitting idle, it’s not working for you. In short, ditch the vacation jar.
2. High Interest Savings Account (Medium Risk/ Medium Reward) High Interest Savings Accounts are undoubtedly a better option. With the money out of immediate reach, you’re already less likely to make impulse purchases. Plus, with a greater rate of return than chequing accounts (on average, High Interest Savings Accounts pay anywhere from 0.05 to 2.3% interest), you can make a little money, too.
However, most High Interest Savings Accounts allow the owner to withdraw money at any time with little or no penalty, increasing the probability that you’ll reallocate your vacation fund before next year’s getaway. So, while High Interest Savings Accounts do offer a modest reward, they also pose a moderate risk for blowing your savings, too.
3. Guaranteed Investment Certificates (Low Risk, High Reward) A great option! If you have the money today, and want to ensure you’ll have it in one year’s time, invest in a Guaranteed Investment Certificate (GIC). Here’s a breakdown of how they are a secure and stable solution.
GICs are a type of deposit given to a financial institution for a predetermined period of time (called a term). In exchange for lending the financial institution money, you’ll receive your deposit in full as well as interest earned once you hit your maturity date at the end of the term. In exchange for locking in your money, you’ll also earn more interest than the average High Interest Savings Account; for example, EQ Bank currently offers a return of 2.76% on one-year GICs which is one of the highest rates in the country.
For those using a GIC to hold onto vacation savings, there’s little risk the money will be spent before maturity (if you’ve invested in a non-redeemable GIC) – ensuring that you prioritize next year’s family vacation. Just remember that you’ll need to find an alternate source of funds (or borrow money) if other expenses come up in between.
We like to travel over the summer months so I’ve learned to stay one step ahead of my vacation spending: I normally save up from January to June and then purchase a one-year GIC. The following year on July 1st, I have my “fun funds” ready to go. Since I do this every year, I’m always guaranteed to have money to spend on family togetherness.
Sounds doable? Of course it is! For more information on GICs, visit EQ Bank.
Rates shown are in effect as of May 28, 2018 and are subject to change. For GIC terms equal to one year, simple interest is calculated on a per annum basis and paid at maturity. Interest is accrued for the entire GIC term. Non-Redeemable. For more GIC rates and information, visit eqbank.ca. EQ Bank is a trade name of Equitable Bank.
While you’re busy saving for next year’s vacation, here’s a little spending money to take along! Enter to win a $100 prepaid Mastercard – simply fill the form below with your qualifying entries. Good luck!