The summer money mistake 1/3 of Canadians make

It’s summer, the time to bury your toes in the sand, enjoy the warm breezes and forget about your finances, right?

Or is planning for the future on your to-do list, along with booking a hotel, packing the car, and picking a trashy novel?

Maybe it should be.

A whopping 83 per cent of Canadians admit that their increased spending in the summer affects their ability to put money aside for a rainy day, according to a recent survey by Tangerine.

The survey found that two thirds of Canadians blow more on food, drink and entertainment in the summer, with weekend trips and vacations also taking an increased bite out of their household budget.

Only 12 per cent of Canadians see summer as a time for saving, compared with 47 per cent who think of saving during the colder months. In fact, 33 per cent of Canadians don’t contribute to their savings over the summer, according to a survey by Tangerine, the bank that was ING Canada, before being bought by Scotiabank. 

Another survey, this one conducted for BMO, found that Canadians plan to spend an average of $5,605 this summer, with vacations and socializing accounting for the bulk of the spending.

That poll found that we'll spend just over $2,000 on vacations, and that entertainment costs an average of $2,166 for outings and increased entertaining at home. (Other summer activities, home improvements and seasonal purchases rounded out the list.)

Silvio Stroescu, Managing Director of Deposits and Investments at Tangerine, says that if you have saved throughout the year, that’s “phenomenal,” and that’s exactly how he recommends people manage their finances. But if you haven’t saved, not all is lost. Stroescu recommends this three-step plan:

1. Track your expenses, to build awareness about how much you’re spending.

2. At the end of the summer tally up all your expenses so you get a sense of the total. For example, Canadians we surveyed spend about $2,000 more than their regular expenses because of summer fun.

3. Set up and automatic savings plan every two weeks, put away enough money so that next summer you’ll have the $2,000 saved up and enjoy the summer as opposed to dipping into savings or taking out a loan.

Is it ever a good idea to put a vacation on credit?

Chris Menard, Area Sales Manager and Personal Finance Expert at BMO, says that credit cards are the most popular payment method for a majority of summer holiday expenses, with 61 per cent of out-of-town vacations charged to credit cards. Canadians also put close to 50 per cent of entertainment costs on credit. Only 27 per cent of Canadians do not rely on credit cards.

While it may seem a mistake to load up on credit in the summer, Menard says there are a few good reasons to use credit cards; some offer car rental insurance and health insurance. Check your card’s policy, you may be able to save money there, and he also recommends choosing a card with cash back. These cards offer a percentage of all money spent back, and he points out that you won’t pay interest if you pay the bill by the end of the month.

How should people pay for vacations?

Look at your bills, and make some choices. For example, your cable bill might have room for negotiation, according to Stroescu. “If you find you’re paying for bundles or channels you’re not using ... have the discipline to take the savings and put it in a savings account,” he says. “The importance of building that savings habit is critical.”

Have a budget

When planning vacations, make a budget and stick to it, says Menard. He suggests doing a regular checkup on your spending, so you’re not left with bills to pay off when the summer is over. “Do a regular checkup on your spending. Keep on top so you’re not overspending.”

“Millennials in particular tend to fund their summer fun with credit cards,” says Stroescu. “They may be at the start of their career, not a lot of money saved up. However it’s also concerning if you’re dipping into a credit card; when the summer ends, rather than saving for next year, you’re paying for last summer - more of a painful exercise.”

What can students do?

Starting a savings habit early is important, says Menard. When asked what students can do to help save during their summer break from classes, he suggested opening a premium rate savings account that you don’t touch, where you can deposit part of your paycheque. “Out of sight, out of mind.”

Know where the money is going

Tracking is the most important thing, says Stroescu. “If you pull out a credit card and don’t feel like you’re taking money out of your wallet or your pocket to pay for something, losing track of how much you’re spending could be dangerous. If there was one thing to do different this summer -- start tracking expenses.”

And where is it going? Here's what BMO survey revealed...

Top Summer Spending Categories
Longer vacations & weekend trips	$2,038
Social outings	$1,160
Entertaining friends and family at home	$1,006
Summer activities/entertainment	$522
Home & Garden Improvements	$322
Seasonal consumer goods	$227
Big purchases	$212