The cheapest way to do it?
Don't go in the school holidays - not getting into a debate here about pulling kids from school, but stating as a fact that it will be much cheaper (depends on if your schools issue/ can impose fines though.)
Don't stay in hotels - havong a family of five means an expensive family room, or two rooms. Appartments may me an option - apart' city have some good close to airport places.
Book everything yourself and build your own package. Fly cheap and book early. This probably means flights at rubbish times, which is nt great with a toddler, but it's cheaper.
Don't pay for additional luggage. Get used to packing light and wearing the heaviest items on the plane. Shorts and t shirts weigh very little. Don't pack going out clothes or spare shoes other than flip flops - they are too heavy.
Book self catering - a washing machine is important as you will have no spare close. Holidaylettings or similar are good. If you find a place you like stick with it. You may then be able to book direct with the owner for following years and save money on lettings fees. Hire the cheapest car you can find using price comparison websites. Book via Quidco for cashback.
Don't eat out. Use local supermarkets and take picnics out with you. Local markets are lovely, but I find the food in them expensive. Lots of bbqs in the evenings.
When my children were small I managed to save a lot of money by booking like this - we let the airlines decide where we went by booking the cheapest flights we could and using that as the starting point for the holiday. France was usually the cheapest, though we also went to Spain (cheaper car hire) and Italy. In France we even managed to stretch as far as a house with a pool most years - so spent very little when we were there as the kids loved being in the pool most of the day.