Canadians are squirreling away more savings money than ever, but a majority still come up short when unexpected expenses arise, says a new poll.
Sixty-eight per cent of Canadians surveyed have had to dip into their rainy day fund in emergency situations but the majority of them – 58 per cent – didn't have sufficient cash to cover the full cost of the expenses, according to the BMO Rainy Day survey, released Wednesday.
BMO Economics data indicate that the personal savings rate in Canada has risen to 5.5 per cent in the first quarter of 2013 from a historic low of 1 per cent in 2005.
A majority of Canadians responding to the Pollara survey – 51 per cent – have less than $10,000 socked away for unexpected expenses and 17 per cent have less than $1,000.
Fewer than half of those who have had to draw from their emergency funds – 49 per cent – for major car or home repairs were able to cover the whole cost, says the survey.
And only one-third – 35 per cent – of those in the poll who had to deal with a job loss said they had enough money put away to keep them going financially.
"It's encouraging that the savings rate in Canada is beginning to trend upward. However, many Canadians are still coming up short when faced with a financial emergency," said Christine Canning, head of everyday banking products, BMO Bank of Montreal.
"Cutting back on non-essential spending – such as buying coffee or lunch at work – is one way to gather extra funds to contribute to your rainy day fund."
Once rainy day savings are gone, 41 per cent of respondents said they would most likely sell assets such as their car or jewellery, or turn to family and friends for help.
One quarter – 27 per cent – said they would leverage a line of credit and 18 per cent said they would cash in their investments.
Among the most popular places to put emergency funds, 49 per cent said they use a tax-free savings account (TFSA), 47 per cent said a savings account and 47 per cent referred to such vehicles as guaranteed investment certificates (GICs), mutual funds and stocks and bonds.
The typical emergency fund should be equivalent to six months of one's income, have a high level of principal stability and be easily available in a savings or investment vehicle, says the report.
The survey was completed between July 26 and July 30, 2013, based on a sample of 1,000 Canadians. A probability sample of this size would yield results accurate to plus or minus 3.1 per cent, 19 times out of 20.