Canadians Forced To Dip Into Their Savings

Canadians forced to dip into their savings

Canadians forced to dip into their savings to stay afloat.

And the situation has reached the point where savings levels are the lowest since 2005.

The savings levels are averaging a mere 1.4 per cent over the past year.

The savings rate is based on the amount of money you have left over after all your spending.

“Canadians dipped into their nest eggs to compensate for weak real disposable incomes,” says economist Krishen Rangasamy.

He is with the National Bank Financial.

Canadians Forced To Dip Into Their Savings

And that low savings rate has important business implications for all of us.

With less available money Canadians will spend less on shopping and entertainment.

And that means businesses will have to cut back.

And those cutbacks will result in hiring fewer employees.

But that is not all.

When businesses have lower sales they cut back on their inventory.

Gradually that will trickle down to other businesses,

And they will be forced to cut back.

And the low savings rate means trouble for Canadians.

“It’s concerning that households aren’t building up buffers and prepping for retirement like they used to,” says  Brian DePratto.

He is an economist with the Toronto-Dominion Bank.

He made those comments to the Financial Post.

“The extent to which Canadians turn around their priorities when it comes to their financial situation could also mean less money for consumer spending.”

So why is the savings rate so low?

Canadians Forced To Dip Into Their Savings

Canadians say two key things are responsible for their money woes.

The high cost of medical and dental care.

And that often means  having to take out payday loans.

The Angus Reid Institute recently reported that a lot of Canadians were facing serious money woes.

As much as 21 per cent of Canadians say they can’t afford to go for dental care, while one-quarter reported they have recently had to borrow money to buy groceries.

To study how Canadians struggle with their money, people were asked about 12 money-related situations, including whether they’ve used a pay-day loan-type service, if they’ve used a food bank, if they’ve not been able to pay a utility bill and if they can afford to go for dental care.

And based on what they said they were placed into four groups:

  • Struggling.
  • On The Edge.
  • Recently Comfortable.
  • Always Comfortable.

In the struggling category the highest percentage – 51 per cent – are in the age group of 31 to 54.

The on the edge group – 39 per cent – are also in the 31 to 54 age group, but the 18 to 34 age group comes in at a close second at 36 per cent.

The recently comfortable group – 36 per cent – are in the 31 to 54 age group, followed by the 55 plus age group at 35 per cent.

The last group – the always comfortable one – the age group 55 plus scores the highest percentage at 44 per cent.

And of course skyrocketing housing and shelter costs add to the money woes.

 


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