Do you have plans to travel this holiday season?
As the Canadian dollar loses ground against major global currencies, some travellers are beginning to feel the pressure. A weaker dollar translates to less purchasing power abroad, which can make trips to popular destinations like the United States, Europe, or even tropical getaways more expensive than in previous years.
Whether you’re dreaming of an international escape or a cozy Canadian getaway, I’ll explain how current exchange rates can impact your travel plans. I’ll also share tips to help you plan smarter and protect your wallet.
The Bank of Montreal’s latest Real Financial Progress Index revealed that 79 per cent of Canadians are planning to cut their holiday budgets this year. This includes spending on gifts, dinner parties, and even travel for vacation or to see family.
In early November, the loonie fell to a four-year low, and some experts believe the dollar will remain low through the end of the year.
For those planning to travel internationally for the holiday, the effect this has on exchange rates could be especially impactful. For example, with a depreciated dollar, exchanging your money for U.S. dollars or euros means you’ll get less value for each dollar spent. This directly impacts how much you’ll pay for:
Additionally, international travel packages often factor in currency exchange rates, which could push costs higher for those booking through a travel agency or buying all-inclusive packages.
At home, even the usual holiday expenses, like buying groceries or shopping for gifts, may feel pricier than you may remember in previous years. This could be one of the reasons why thrifting and buying from overseas retailers like Shein or Temu have become particularly popular this holiday season.
Although the Canadian dollar is weakening, the changes aren’t necessarily drastic on a small scale. For example, in January 2024, USD $1 was equivalent to CAD $1.33. As of Dec. 4, 2024, USD $1 was equivalent to CAD $1.40.
This represents a 5.2 per cent increase in cost and expenses if you plan on travelling to the U.S.
So if you paid $2,500 for a round trip to the U.S. last holiday season, that same trip would now cost you around $2,630.
The key to strategizing your international travel is to find creative ways to offset this small increase. Here are some ideas you can try to incorporate as you travel this holiday season.
Try to avoid booking last-minute flights and hotels, as companies typically increase their rates the closer you get to the actual travel date. By booking a couple of weeks in advance, you can save hundreds on your tickets and lodging.
If you have a credit card that offers cashback on travel expenses like planes, hotel stays, eating out, or ridesharing, now is a great time to use it. The extra percentage of cashback you’ll earn can offset your reduced purchasing power in the form of rewards that you can apply to your credit card balance or use for future expenses.
When travelling internationally, staying in a hotel typically provides the easiest, most carefree experience. However, you’re going to pay a premium price for the extra amenities.
By contrast, you can often save quite a bit by booking a local Airbnb or VRBO listing in the region where you’re travelling. Just be sure to do your research and book with a host who’s received positive reviews. Also, do some research into the neighbourhood you’ll potentially be staying in.
Another great reason to do this is that you can often stay in a home that provides a full kitchen, allowing you to cook more and eat out less, which can save you hundreds of dollars over the course of a week.
As much as you may want to visit the sunny shores of Hawaii, the U.S. islands are also very expensive (even for those with U.S. Dollars).
A great alternative could be to visit a more tropical destination like Mexico or the Dominican Republic. While you might not save a lot on the plane tickets themselves, the cost to stay, eat, and enjoy activities is likely going to be significantly more affordable while providing beautiful beaches, clear water, and a perfect escape from the icy winter storms.
Unfortunately, it’s hard to predict exactly where the loonie will end up in the near future. From impending changes to U.S. foreign policy to other global events, a number of factors could push the Canadian dollar down or lift it higher.
The best thing we can all do now is to stick to solid budgeting principles and do our best to save and invest where we can.
Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial.
Do you have a question, tip or story idea about personal finance? Please email us at dotcom@bellmedia.ca.
