Paying for Vacations and Children's Sports With a Policy Loan

Canadians spent about $50 billion on tourism outside the country in 2025, according to Statistics Canada, and $22.8 billion of it went to leisure trips overseas. Behind those numbers are families like one I think about often: two parents and three children who love to travel, spend a great deal on it, and pay for it the way most households do. The tickets go on a credit card, the card is paid off slowly or from savings, and the cost of the money is never counted.

This guide asks a simple question: what if the money for the trip passed through the family's own participating whole life policy first? It walks through the sequence step by step, with a worked example at an assumed 6.5% policy loan rate, a credit card at 19% and a savings account at 2.5%. It applies the same logic to children's sports, which cost many families as much as travel. And it says plainly where the idea fails. I am paid by insurer commissions when a policy is bought, which is worth knowing as you read.

Why does a family vacation deserve a financing plan?

Because every vacation is financed, even one paid in cash. A family either pays interest to a lender or gives up the interest its own money was earning. A plan decides which cost the family pays, and whether the money comes back afterwards.

Most families plan the trip carefully: dates, flights, hotels, activities. Very few plan the money with the same care. They decide whether they can afford the trip, but not how it will be paid for and what that choice costs.

R. Nelson Nash, the author who first described the idea this site builds on, put it in one sentence: you finance everything you buy. If you borrow, you pay interest. If you pay cash, you give up the interest that money would have earned. There is no third option where the money costs nothing. The page on opportunity cost explains this principle in full.

Travel makes the point sharper for three reasons.

• It repeats. A car is bought every several years. A family that travels does it every year, sometimes twice. A small cost repeated every year for twenty years is a large cost.
• It is large. For a family of five, flights alone can reach several thousand dollars before a single night of lodging.
• It leaves nothing behind. A trip is spending, not an asset. That is not a criticism, because memories with your children matter. It means that whatever the trip costs in interest is pure cost, with nothing to sell later.

This is where Infinite Financial Sovereignty® comes in. The approach does not tell a family to travel less. It asks the family to route the money through a contract it owns, so that the pool of money it relies on is rebuilt after every trip instead of being drained.

What does a family trip really cost, and how is it usually paid?

For a family of five, a trip abroad can easily cost $10,000 to $20,000. Most families put it on a credit card, then either pay the card from savings or carry the balance for months at a high rate. Both routes cost money, one visibly and one quietly.

Consider an ordinary example, assumed for illustration. A family of five plans two weeks in Europe. Five return flights, lodging, meals, local transport and activities come to $15,000. There is nothing unusual about that figure for a family of this size, and some families spend much more.

The payment usually follows one of three patterns.

1. The card is carried. The family charges the trip and pays what it can each month. The Financial Consumer Agency of Canada uses 19% on purchases as its example rate, and interest applies to the whole balance once the grace period is lost.
2. Savings are spent. The family charges the trip and pays the card in full from a savings account. No card interest is paid, but the savings are gone, and so is what they were earning.
3. A line of credit is used. The rate is lower than the card, but it is set by the lender, can change, and depends on the lender's willingness to keep the line open.

None of these is wrong. Each has a cost. The idea on this page adds a fourth pattern, and it can only be judged by putting all of them side by side with the same numbers.

How does the credit card, policy loan and repayment sequence work?

The family charges the trip to a credit card, requests a policy loan right away, pays the card in full before the due date so no card interest applies, then repays the policy every month as if it were repaying a lender. Five steps, in that order.

Here is the sequence, step by step.

Step 1. Charge the trip to the card. A credit card is fast, accepted everywhere, and may carry travel benefits such as points or travel coverage, depending on the card. Read your card's terms; this page does not recommend any card. Never use a cash advance for this: the Financial Consumer Agency of Canada notes that cash advances have no grace period and cost interest from the first day.

Step 2. Request the policy loan the same week. A policy loan is an advance from the insurer's own funds, secured by the policy's cash value. There is no credit application and the insurer does not ask what the money is for. It takes some business days to arrive, on the insurer's timetable. That delay is why the request goes in right after the purchase, not near the due date.

Step 3. Pay the card in full before the due date. Federally regulated card issuers must give a minimum 21-day interest-free grace period on new purchases, as long as the balance is paid in full by the due date. If the loan arrives in time and the whole balance is paid, the card costs nothing in interest. If the balance is not paid in full, interest can apply to the purchases.

Step 4. Repay the policy every month. This is the step that decides everything. The family sets up a monthly repayment to the insurer, the same amount it would have set aside to save for the trip. In the example below that is $1,250 a month.

Step 5. Refill, then repeat. When the loan is cleared, the cash value is fully available again for the next trip. The family that keeps the monthly amount going, as a deposit into the policy where the contract allows it, is building the pool for the following year.

The detailed mechanics of the loan itself, including interest, repayment and tax, are on the page about how a policy loan actually works. Nothing here departs from it.

What does the arithmetic look like on a $15,000 trip?

At an assumed 6.5% loan rate and $1,250 a month, the policy loan costs about $553 in interest. The same payments on a card at 19% cost about $1,770. Spending savings that earn 2.5% and rebuilding them costs about $203 in lost interest, before tax.

Every figure in this example is an assumption for illustration, not a quote from any insurer or card issuer. Interest is calculated monthly on the declining balance. Your contract may calculate and charge interest differently, for example once a year on the anniversary.

Three observations matter more than the numbers themselves.

First, carrying the card is by far the most expensive route. Moving the balance from 19% to 6.5% saves about $1,217 on one trip. A family that travels every year and currently carries its card is paying that difference every year.

Second, spending savings costs the least interest. This is the honest part, and it must be said. In this example, draining a savings account and rebuilding it costs about $350 less than the policy loan. If the savings interest is taxed at a 40% marginal rate, the true cost of that route is closer to $122. Anyone who tells you a policy loan is always cheaper than cash is not doing the arithmetic.

Third, the routes leave the family in different positions. After twelve months, the savings route leaves the account rebuilt, if the family actually rebuilt it. The policy route leaves the loan repaid and the cash value intact. The next section explains why that difference is the real reason some families choose the policy, and why it is not automatic.

Why is paying cash from savings not the end of the story?

Because the policy's cash value stays in the contract while the loan is outstanding, and the contract keeps crediting it as its terms provide. The savings account, once spent, earns nothing until it is rebuilt. Whether the policy comes out ahead depends on the dividend and on the contract.

When a family spends its savings, the money leaves. The account earns interest only on what is left, and only rebuilds if the family deposits money back, month after month, with nothing requiring it to.

When a family borrows from its policy, the cash value is not withdrawn. It is pledged as security. The contract continues: guaranteed values keep increasing under the contract's schedule, and any dividend the insurer's board declares is credited under the contract's rules. The life insurance also stays in force the whole time, with the loan balance deducted from the death benefit until repaid.

So the real comparison is not $553 against $203. It is this: does what the contract keeps crediting on the undisturbed value during the year exceed the extra interest paid? Two facts decide it.

• Dividends are not guaranteed. They are declared each year at the insurer's discretion, so the amount credited while a loan is outstanding is not a known figure you can set against a known interest cost.
• Some contracts credit borrowed value differently. Ask the insurer, in writing, whether an outstanding loan changes the dividend credited on the part of the cash value that secures it. The answer is a property of your specific contract, fixed when it was issued.

There is also a human difference that numbers do not capture. A savings account has no structure: nothing tells the family to put the $15,000 back. A policy loan, repaid on a schedule the family sets for itself, has a balance printed on every statement. For some families that visible balance is exactly the discipline they lacked. For others it changes nothing, and for them the savings account is simpler and cheaper.

Why must the policy be filled before it can be used?

Because a loan can only be made against cash value that already exists. In the early years of a policy, a large part of each premium goes to the cost of insurance and setup, so the available value is small. The money has to go into the policy first, often for several years, before the policy can pay for anything.

This is the point families most often skip, and it is where the idea succeeds or fails. A policy is not a credit line that opens on the day it is issued. It is a pool that has to be filled.

Nash called this building the system before using it, and he was blunt about it: most people want to use the policy before they have put enough into it. A family that buys a policy in January and hopes to finance a summer trip from it in July will usually find very little available to borrow.

For a family that travels a lot, the conclusion is uncomfortable but useful. The first travel money should go to the policy, not to the trip. In practice that means one of three choices during the first phase:

• Postpone one large trip and deposit that year's travel budget into the policy instead.
• Split the budget. Take a shorter or closer trip and deposit the difference.
• Keep traveling from savings or income for now, and fund the policy from other money until the cash value can carry a trip on its own.

None of these is painless. That is the point. A family that is not willing to give up anything in the first years is not yet ready to finance its trips through a policy, and it is better to know that before buying one.

How does a deposit option such as an EDO speed up early cash value?

A deposit option lets the owner pay more than the base premium, and the extra buys paid-up additions, which carry cash value from the start. A policy designed with a large share of optional deposits builds accessible value sooner than one built mainly on base premium, within limits set by tax rules.

A participating whole life policy has a base premium that is due every year. Many insurers also offer a rider that accepts additional deposits. Those deposits buy paid-up additions: small blocks of fully paid life insurance that carry their own cash value and can themselves earn dividends.

One example is Equitable Life of Canada's Excelerator Deposit Option (EDO), which it publishes in its advisor material. It is named here only because its rules are published and specific, not as a recommendation of any insurer. Under the November 2025 version of those rules, each deposit carries an 8% premium load for commissions, premium tax and administration, skipped deposits do not carry forward, and no payment is accepted that would make the policy lose its tax-exempt status.

Three points matter for a family planning to finance its trips.

• Design decides the early years. Two policies with the same total deposit can show very different cash value in years one to five, depending on how much goes to base premium and how much to optional deposits. Ask for the illustrated cash value year by year, not only at age 65.
• The room is limited. The Income Tax Regulations cap how much can go into an exempt policy relative to its coverage. A family cannot pour unlimited money into a small policy.
• Unused room may be lost. Under many riders, a deposit skipped this year cannot be made up next year. The page on what a participating contract can take away covers this in detail.

For a family whose goal includes financing travel, the optional deposit is usually the tool that turns "someday" into "in a few years". It still does not turn it into "this summer".

What would a family that spends $60,000 on travel do differently?

It would send that money through the policy first, instead of straight to airlines and hotels. The trips continue, but each one is paid by a loan that is then repaid, so the same dollars refill the policy instead of disappearing. The first years are for filling, not for spending.

Some families spend far more than the $15,000 in the example. Picture a family of five whose travel adds up to $60,000, whether that is one year of frequent trips or four years of one large trip each. Today that $60,000 goes out and does not come back.

The idea behind Infinite Financial Sovereignty® is to change the route, not the destination. Here is how the $60,000 looks in the two phases, using the same assumptions as above.

Phase one: filling. Travel money is redirected, wholly or partly, into base premium and optional deposits until the cash value is large enough to carry a year's trips on its own. How long that takes depends on the design, the deposits, and the dividends actually declared. For many families it is several years.

Phase two: financing. Each year's trip is charged to the card and cleared by a policy loan, then repaid at $1,250 a month. Over four trips of $15,000 each, the interest paid to the insurer is about $2,210. The same four trips carried on a card at 19% would cost about $7,080 in interest.

The table repeats the honest point: savings cost the least interest. The difference is what remains afterwards. In phase two, the family's policy holds its cash value through every trip, the life insurance stays in force, and the monthly habit the family built during phase one keeps running. Whether that beats the savings route over time depends on dividends, which are not guaranteed, and on the family repaying every loan in full.

How can children's sports be financed the same way?

Children's sports cost Canadian families thousands of dollars a year, and the bills arrive in lumps: registration, equipment, tournament travel. A policy loan repaid monthly over the season can replace a carried card balance, under the same conditions and risks as a vacation loan.

A survey by Solutions Research Group, carried out in January 2023 with 2,996 parents, found that Canadian families spent on average about $1,227 a year on sport for a child aged 3 to 7, and more than $2,500 a year for a teenager aged 13 to 17. Hockey, skiing and equestrian averaged $3,600 to $4,350 a year. About 30% of the spending went to travel and transportation, and 58% of parents said they worried about the cost.

For a family with three children in competitive sport, $7,500 or more a year is not unusual, and much of it is due in August and September.

The mechanics are identical to the trip: charge the registrations and equipment, request the loan at once, clear the card within the grace period, then repay monthly through the season so the loan is cleared before the next registration. A family that finances both travel and sports this way needs a larger policy and a stricter calendar, because two loans may overlap.

One caution is specific to sports. Costs tend to rise as children progress, and a sport a child loves at nine can cost twice as much at fourteen. Build the repayment on the season you are paying for, not on the one you hope for.

What does repaying like an outside lender would require mean?

It means setting a monthly repayment the family must honour, at least as demanding as a lender's schedule. Nash went further and suggested repaying more than the loan and its interest, with the extra going back into the policy as deposits where the contract allows it.

The policy does not require repayment on a schedule. That freedom is real, and it is also the trap. A family that owed $15,000 to a lender would make every payment on time, because missing one has consequences. The same family, owing the same amount to its own policy, is tempted to skip a month, then another.

Nash's answer was to treat the policy with more respect than any lender, not less. In practice that means three habits.

• Set the repayment before the trip. Decide the monthly amount and the end date when you request the loan, and set up an automatic payment.
• Repay at least what a lender would charge. A family used to carrying its card at 19% can repay at the card's pace and send the difference into the policy as an optional deposit, within its limits.
• Keep the habit when the loan is cleared. The monthly $1,250 that repaid the loan becomes next year's deposit. That is how phase two funds itself.

The story of Nash's twin sisters shows the same idea with a car: two sisters, the same purchases, and a different result depending on where the payments went.

What are the tax rules on a policy loan for a vacation?

The interest is not tax deductible, because a vacation is personal spending. A policy loan is also a disposition for tax purposes: the part of the loan above the policy's adjusted cost basis just before the loan is income in the year you receive it. Ask for the basis before each loan.

Two tax points apply to every vacation or sports loan.

The interest is a personal cost. In Canada, interest is deductible only when the borrowed money is used to earn income from a business or property. A trip or a hockey season is neither, so the interest on the loan is paid with after-tax money, exactly like card interest.

The loan can create taxable income. Under section 148 of the Income Tax Act, a policy loan is a disposition of an interest in the policy. The part of the loan above the adjusted cost basis immediately before the loan is income in that year, and every loan lowers the basis. In the early years of a well-funded policy, the basis is often higher than the loan, so no income arises, but that changes over time and differs for every contract. If part of a loan was taxed, paragraph 60(s) allows a deduction for repayments, up to the amount included.

The practical rule is simple. Before each loan, ask the insurer for the current adjusted cost basis and for an estimate of any income it would report, and confirm the result with your accountant.

What can go wrong when a family finances its trips through a policy?

Almost everything that can go wrong comes from repayment. An unpaid loan grows as interest is added, reduces the death benefit, and can end the policy if it exceeds the cash value. Timing, rate changes and non-guaranteed dividends add smaller risks.

The failures are predictable, which means they can be prevented.

• The loan is not repaid. Unpaid interest is usually added to the loan on the anniversary and then bears interest itself. The balance grows faster each year. If it ever exceeds the cash value, the policy can lapse after the notice the contract provides, and a lapse can create taxable income in a year when money is already short.
• Trips overlap loans. A family that books the next trip before the last loan is repaid is stacking debt. The balance never clears and the pool never refills.
• The money arrives late. A policy loan takes business days. If it misses the card's due date, the card's interest can apply. Request early.
• The rate changes. Many contracts let the insurer set and review the loan rate. The 6.5% in this example is an assumption, not a promise.
• The death benefit is reduced. While a loan is outstanding, the balance comes off what the family's beneficiaries would receive. A family that needs every dollar of that coverage should keep loans small and short.
• Dividends are lower than hoped. They are declared each year and are not guaranteed. A plan that only works with a particular dividend is fragile.
• The policy is abandoned early. A policy cancelled in its first years usually returns less than was paid in. A family that is not sure it can keep the deposits going for many years should not start.

What should you ask before the first trip loan?

Ask the insurer how the loan rate is set, how interest is charged, whether a loan changes the dividend, how much is available, how long requests take, and what the adjusted cost basis is. Ask yourself whether you will repay on a schedule.

Questions for the insurer and your representative, in writing:

1. How is the loan rate set, and can it change?
2. Is interest charged monthly or on the anniversary, and what happens to unpaid interest?
3. Does an outstanding loan change the dividend credited on the value that secures it?
4. How much can I borrow today, and is there a minimum loan?
5. How many business days are requests taking now?
6. What is the adjusted cost basis today, and what income would you report on the loan I have in mind?
7. How am I paid on this policy, and by whom?

Questions for your family:

1. Have we finished filling the policy, or are we still in the first phase?
2. What is our monthly repayment, and when will the loan be cleared?
3. Will this loan be cleared before the next trip or season?
4. Do we have an emergency fund outside the policy?

What this page will not tell you

It will not give you a real loan rate, a dividend scale or a cash value, because those belong to a specific contract from a specific insurer and change over time. Every figure here is an assumption chosen to show the arithmetic. It will not tell you that a policy loan beats paying cash, because in interest alone it often does not. It will not tell you how much to spend on travel or sports. And it will not tell you which card to use. The worked example is a way to think, not a forecast.

Who this does not suit

This approach does not suit a family that carries debt it cannot pay down, a family without an emergency fund outside the policy, or a budget that could not keep deposits going for many years. It does not suit anyone who wants to travel from the policy in its first year, or anyone who, being honest, would not repay a loan that no one forces them to repay. It can suit a family that already travels or pays for sports every year, that is willing to give up something during a first phase of filling the policy, and that wants the money it spends on those things to come back instead of disappearing. If that describes you, start with the self-check on the Becoming a Client page.