The percentage of Canadians who are not contributing anything to their household savings has fallen dramatically, according to a new survey.
In a poll for the annual Bank of Montreal Household Savings Report, 17 per cent of respondents said they did not save anything last year, down from 28 per cent in the previous year.
The result indicates that the message about the dangers of too much debt and looming higher interest rates is getting through to the average Canadian.
Those participating in the poll also said they plan to save more this year than in 2013.
Last year, the average saving was $8,764 and the target for 2014 is $9,635, a 10-per-cent increase, according to the report.
Statistics Canada numbers show the household savings rate rose to 5.4 per cent in the third quarter of 2013, compared with 5 per cent in 2012.
“Canadians increased their savings last year in response to higher long-term interest rates and with one eye on elevated debt,” said Sal Guatieri, senior economist at BMO Nesbitt Burns.
“We expect the saving rate to remain above 5 per cent in 2014, as households are borrowing at the slowest rate in three decades and long-term interest rates are likely to drift higher due to a stronger economy and a reduction in [U.S.] Federal Reserve stimulus.”
The personal savings rate stood at a near-historic low of 3.9 per cent at this time last year, compared with more than 6 per cent at the height of the latest recession, and close to 20 per cent in the early 1980s, according to Statistics Canada numbers previously cited by BMO Economics.
Among the most common savings goals identified by respondents in the latest survey:
· In top spot, at 48 per cent: vacation time
· Second place, at 43 per cent: building a rainy day/emergency fund
· Third, at 39 per cent: retirement savings
Respondents in the poll said the most common barriers to meeting their savings goals include insufficient income – 69 per cent, followed by high expenses – 67 per cent, and management of debt – 50 per cent.
The majority of those planning to save this year intend to use a chequing account – 66 per cent – or Registered Retirement Savings Plan (RRSP) – 55 per cent.
Half – 47 per cent – said they will use a Tax Free Savings Account (TFSA), and 31 per cent are opting for a high-interest savings account.
Among provinces and regions, those in British Columbia plan to save the most at an average of $15,117, followed by Albertans at $12,478.
Quebeckers plan on saving the least: an average of $6,179. Those in Atlantic Canada indicated they’re aiming for average savings of $7,344.
On average, men in 2014 plan on saving $11,228, compared with $7,989 for women.
“Canadians appear to be setting their sights higher in 2014, which is encouraging,” said Christine Canning, head of everyday banking at BMO Bank of Montreal.
“However, it’s apparent that various factors, such as high expenses and debt, could prevent them from meeting their savings goals.
“With these barriers in mind, we advise those who are falling short to take simple steps, such as putting aside smaller amounts in a separate account and using automatic payments in order to get started.”
The report is based on polling results from a Pollara survey – completed between Jan. 10 and Jan. 14 – using an online sample of 1,002 Canadians. A probability sample of this size would yield results accurate to plus or minus 3.1 per cent, 19 times out of 20.