Shopping Spoiler Alert: Canadians Aren’t Saving EnoughPosted: December 04, 2018 By : Evelyn Jacks & Beth Graddon
Posted in: Strategic Thinking, Debt Management, statistics canada, interest rates, Bank of canada, retirement savings, Steven Poloz, household savings rate, disposable income, Financial Planning Standards
In the holiday spirit yet? This news might dampen it: on Friday November 30, Statistics Canada released a report on GDP, income and expenditure for the third quarter of 2018. The big news? In 2018, Canadians have had the worst household savings rate on an annual basis since 2005, averaging only 1.4% over the past year. For the third quarter of this year, the household savings rate was a mere 0.8%; the lowest quarterly level since early in 2017.
There are broad repercussions for everyone that come with the lower household savings rates outlined in the Statistics Canada report, specifically, the impact on economic growth that is driven by consumer spending. But even more concerning are the implications to young Canadian families and their ability to financially manage an emergency situation or unexpected expense.
In fact, an October a report by the Financial Planning Standards Council indicated that 33% would fail a “financial stress test,” and face hardship should a significant unexpected expense arise. An Ipsos report from one year prior said than an unexpected expense of as little as $200 could create this situation for more than half of Canadians. Plus, they are struggling to pay down debt, too — 20% rarely (if ever) pay off their credit card balance at the end of the month.
Worse still, 31% of Canadians agree that rising interest rates push them closer to bankruptcy, and this doesn’t bode well for retirement planning. This was further highlighted in the Financial Planning Standards Council survey, which reported that 64% don’t have access to an employee savings program, and six in ten rarely maximize their annual RRSP contribution amounts.
The money moral? As the household savings rate in Canada hits its lowest point in over a decade, and the forecast is for Canadians to have even less disposable income in the future, debt management and tax-efficient income strategies become more important than ever. it’s prudent to take them into account before the holiday shopping season!
Evelyn Jacks is Canada’s most trusted educator in the tax and financial services. Founder and President of Knowledge Bureau and developer of the Real Wealth Management discipline, she is also the author of 53 books.
Additional educational resources: This data shows that more and more Canadian families need help in debt management strategies. Consider taking an online certificate course: Debt and Cash Flow Management.
Savvy tax and financial advisors that can help families grow and retain their wealth at all life stages. Enroll in the Real Wealth Manager Designation Program: learn how to deliver on goal-based, client-centric wealth management solutions. Register by December 15 for tuition savings!
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