Financial Literacy

Millennials are outpacing baby boomers when it comes to saving

By: Jessica Mach on January 29, 2019

Millennials are used to fighting the accusation that they’re bad with money, and now, there are new numbers to back them up: since 2016, millennials have increased their RRSP contributions by a higher percentage than any other age cohort.

Yes, even boomers.

The data comes courtesy of the Bank of Montreal (BMO), which tracked the RRSP contributions of different age cohorts. Millennials grew their RRSP balances from an average of $15,377 in 2016 to $28,821, representing a substantial 87% jump. The numbers are based on a survey of 1,518 adult Canadians.

Meanwhile, boomers only saw their RRSP accounts grow by 30% over the same time period, from an average balance of $137,360 in 2016 to $178,664.

As savers, both age cohorts are better than average. Across all age groups, RRSP balances grew by only 21% since 2016, from $83,635 that year to $101,155.

Still, the very fact that the numbers are increasing and not decreasing is a good sign, says BMO — especially as the country faces some economic uncertainty.

“While balances typically rise due to contributions and asset appreciation, it is important to note Canadians of all generations are saving for retirement despite financial priorities and market volatility,” said Robert Armstrong of BMO Global Asset Management.

“It is encouraging to see a national shift in the attitude and approach to retirement – especially amongst Millennials surveyed.”

People are also taking money out of their RRSP funds less frequently; since 2017, withdrawals have decreased by one third. However, the size of the withdrawals have increased for people under 71, with the average amount in 2018 reaching $25,779 — up from $20,952 in 2017.

Buying a home was the top reason reported for making an early withdrawal.

Mar. 1, 2019 is the deadline for contributing to your RRSP for the 2018 tax year. The money that you contribute to your RRSP account is not taxable until you withdraw it — and you probably won’t reach for it until you retire. Let’s say you make $50,000 a year. If you take $5,000 of that income and plug it into an RRSP, the government will tax you as if you made $45,000 annually.

About 62% of the Canadians surveyed by BMO reported having already contributed to their RRSP, or planning to do so before Mar. 1.