If you have high interest in travelling again ...

Trip cancelled? Consider putting that money into a HISA for flexibility

Q: My wife and I had a European holiday booked for late spring this year, but it’s been cancelled due to the coronavirus. We got a refund and now have just over $22,000 sitting in our bank account. Everybody says it’s a good time to be investing in the stock market. What do you suggest we do with this money?

A: I’m sorry to hear your trip was put on hold. Obviously, on the short-term, we’ve all got bigger fish to fry, trying to flatten the COVID-19 curve. At the same time, the world’s medical experts are figuring out how to solve this health crisis. I have faith that humankind will do just that; but what I don’t know is when this will happen.

Whether, and how, you invest always depends on what you need the money for. You originally had this cash set aside for a very good reason, and I’m going to suppose that you’ll still want to travel again. So, I think you should invest it for your next holiday, for two good reasons; one financial and one psychological.

Although I’m an optimist, I think it’s fair to assume that you won’t be travelling overseas in the next few weeks or months. But you’re not investing this money for the long term either if you’ll use it for a trip as soon as you can safely travel. Accordingly,

the best place to invest it is in a high-interest savings account (HISA) that allows access to the funds at any time, without penalty.

Now, don’t get too excited about the high interest part. It just means you’ll be earning higher interest than in your bank account, likely around 0.5 per cent, and your original investment is fully guaranteed. Most financial institutions offer HISAs and the interest rate doesn’t vary too much between them.

As you mentioned, some folks think it’s a good time to be investing in the stock market. They might preach the “buy low, sell high” philosophy — which I do, too. Certainly, now is a good time to “buy low.” Unfortunately,

we don’t know when the “sell high” part will kick in. And wouldn’t it be unfortunate if you were able to travel again, but you couldn’t yet “sell high” to fund the holiday? That would be an additional stress at an already stressful time. It’s better to guarantee that you have the money to pay for the trip in your HISA, while earning a little interest for spending cash.

The second motive is that your holiday fund might just help you get through this time of self-isolation. Eventually, the world will open up, and when it does, you’ll be ready to get out of Dodge and see some new sights, eat some new foods, and see some new people. And every time you look at that growing account balance in your holiday fund, you can hear it say, “Ready, when you are.”

As humans, there’s tremendous positive psychological value in knowing that something we want to experience is waiting for us on the horizon. It can keep us grounded in the present, while giving us a sense of optimism for the future.

I truly believe the COVID-19 crisis will eventually be resolved, businesses will get up and running, people will begin to spend, the economy will restore itself, and the stock market will recover. In the meanwhile, invest your holiday monies in a HISA, knowing you will be earning interest daily, without any risk of loss.

I wish you good health while you await your next holiday. And you can rest assured that you’ll have the money available when the time comes for you and your wife to repack your luggage and explore some little corner of the world.

DREAMSTIME.COM Rather than risking your now-cancelled vacation on the stock market, consider putting that money in a high interest savings account. Every time you look at that growing account balance in your holiday fund, you can hear it say, “Ready, when you are.”