You might think that the worst financial crisis in recent times has transformed Canada into a nation of dedicated savers. Well, you would be wrong.
When it comes to saving, 70 per cent of Canadians find reaching a savings goal to be their biggest financial challenge, according to RBC poll results released Thursday. Two-thirds of respondents find it difficult to set up a dedicated savings program while 59 per cent find it a challenge to stay focused on saving money.
The RBC survey also found that despite the financial carnage of the last year, 48 per cent said they're saving about as the same as they have in the past. One-third said they are saving less money while only one in five is saving more money.
Four tips from RBC to help people save: 1. Pay yourself first. This is the golden rule of saving. Get in the good savings habit of setting aside some money from each paycheque. 2. Have a savings plan . A step-by-step plan will have financial milestones to strive for and make you more likely to continue saving if the going gets tough. Decide what you want and commit to it. Whether it's for a vacation or an emergency fund, setting goals helps you save for what's important to you. 3. Make savings a habit. Set up automatic online transfers to your savings account to help you save a portion of each paycheque. You won't have to think about it and you can control how much and how often a transfer is made. 4. Know yourself. Figure out what you actually spend by keeping track of how much you pay for little things like coffee and lunches away from home. A simple tactic such as cutting out one cup of coffee per day can save you a lot of money over time. Even a small amount of money grows over time.
Stephen Foerster, professor of finance with the Richard Ivey School of Business at the University of Western Ontario, says the overall savings rate in Canada peaked in 1982, when 20 per cent of one's income went to saving, and has been declining steadily to recent lows of 5 per cent.
"We have, as a nation, gotten out of the habits that previous generations had, namely making savings part of our daily lives. Instead, there has been more of a focus on consumer purchases, relying on credit cards and other debt as vehicles to buy things," he said in an interview.
Another major problem, he said, is that many Canadians would rather not deal with the task of managing their household finances. "Many people would rather watch paint dry than deal with anything to do with personal finance."
Prof. Foerster believes the recent recession and credit crunch has shifted people's financial habits, although it is a change that is taking hold slowly. "A priority for many Canadians that might not show up in these surveys is debt reduction, which we can think of as a form of saving."
We have, as a nation, gotten out of the habits that previous generations had, namely making savings part of our daily lives. Professor Stephen Foerster
Ashif Ratanshi, the head of branch investments, deposits and direct investing at RBC, says that while people "intuitively understand the importance of a nest egg, especially given recent economic uncertainty, the survey results tell us that saving money is a challenge for all Canadians - regardless of age, income bracket or region."
The poll found that people living in Ontario and British Columbia are more likely to be saving less, while Albertans are more likely to report an increase in their personal savings. In terms of age, the only group that said they are saving more are Canadians aged 18 to 34.
The RBC online survey of 1,001 Canadian adults was done by Ipsos Reid between September 28 and October 1 of this year. The results are considered accurate to within 3.1 percentage points, 19 times out of 20.
A separate poll from Sun Life Financial released Thursday found that Canadians are indeed changing their spending habits as a result of the recent economic and financial woes. It found that 60 per cent of Canadian workers have reduced their debt while 59 per cent say they have spent less since January.
That survey also found that paying housing expenses is the number one financial priority of Canadian workers until about age 51, when retirement saving takes over as the top goal.
Roma Luciw is a writer and web editor of the Globeinvestor.com personal finance site. Please send any comments and story ideas to firstname.lastname@example.org.