Ask Canadians how much they were able to save last year and you’ll probably get two very different answers. At least that’s what the Bank of Montreal’s latest Household Savings Report, released today, revealed.
As it turns out, one quarter of us didn’t put away any savings in 2018, yet 15% of us saved more than $10,000.
The report, conducted between January 10 and 14 by Pollara Strategic Insights, highlights the results of an online survey of 1,000 Canadians.
So, what’s stopping the 25% from saving?
According to the report, 67% of Canadians are “stretching themselves too thin on expenses to be able to save,” while 45% are still working on paying back their debt. Then there are 37% of millennials who say that “social pressures” are what’s preventing them from being able to save money. BMO didn’t elaborate on what constitutes social pressures — we imagine it might be things like dining out with friends or social drinking.
Canada’s household debt levels inched higher in Q3 of 2018, with BMO Economics reporting that the key debt-to-disposable income ratio was 173.8%.
Canadians have had to grapple with rising interest rates, making it harder to keep up with minimum payments on credit products. As well, the report says that the household debt service ratio (which looks at how much of one’s disposable income is going toward paying interest and principal on debt) has risen to 14.5%, while 7.22% of one’s overall income is being put toward interest payments — the most in seven years.
That said, there is some good news.
“Household credit is now rising the least in 35 years, and with consumers expected to spend at the slowest rate in a decade in 2019 due to higher interest rates and tougher mortgage rules, the debt ratio should stabilize if not fall modestly,” noted Sal Guatieri, senior economist at BMO Capital Markets. “There's no better time to tighten the fiscal purse strings than when interest rates are on the rise."
Looking forward to the rest of 2019, survey results indicated that Canadians are pretty optimistic. Over half of us (52%) are planning to save money this year. And 31% of us plan to save up to $10,000. In fact, close to one in three Canadians (29%) claimed to already have more than $100,000 socked away.
How do Canadians want to use their savings? Trips or vacations were among the most popular reasons, followed by home renovations, and then holidays and birthdays.
The longer-term savers have different plans, though. Some 36% of them are saving for retirement. And another 36% are trying to build up an emergency fund.
Some 12% of Canadians, however, believe they won’t be able to save anything this year, and more than a third are unsure how how much they’ll be able to put aside.
“The current environment is putting some pressure on Canadians’ finances, making it more difficult for them to put a greater emphasis on regular saving,” said Carola Corti, managing director of Everyday Banking at BMO Bank of Montreal.
“However, it is encouraging to know that Canadians are coming into 2019 with saving top of mind – it's critically important to prioritize putting money aside, even in smaller amounts.”