💰🐷🏦 Are Canadian Piggybanks Facing Extinction - Or Are They Just Temporarily Collecting Dust? 💵

Friday, 19 April 2024 12:00.PM

- Less than a third of Canadians (30%) put away savings every month; 75% are concerned about their lack of savings; 73% believe Canada faces future challenges due lack of savings, reveals new H&R Block survey. -

• 79% of Canadians say that they have less disposable income than prior years.
• 69% worry about their future financial well-being because they're not putting enough money aside.
• 43% report not typically putting any money aside towards savings.
• 64% say that despite making a decent salary they're worried about making ends meet.
• 60% believe today's new norm is living paycheque to paycheque.
• 73% say that if they can't afford to pay for something - they don't buy it.

A new survey from H&R Block Canada reveals a significant shift around the state of saving in Canada, with 66% reporting that they don't feel they are able to build up their savings. While many financial experts cite the general rule of thumb is that 20% of your paycheque should go towards savings, the new survey, which explores Canadians' sentiments around their personal finances, reveals that most Canadians are nowhere close to this goal. In fact, a colossal 43% say they're not typically putting 'any' money aside towards savings, of which 31% say it's because they don't have money left over from their paycheck and 12% say their paycheck doesn't even cover the cost of living. Of the Canadians that do put aside savings, 39% put less than 10% of their paycheque into savings, and only 19% of Canadians put away the recommended amount of 20% or more of their paycheck into savings.

"There's no doubt that Canadians feel very concerned about the challenges of not being able to put aside enough money into savings," said Yannick Lemay, Tax Expert, H&R Block Canada. "While many continue to hold a mix of tax-friendly savings accounts including Registered Retirement Savings Plans (RRSPs), Tax Free Savings Plan (TFSAs), and First Home Savings Accounts (FHSA), our research indicates that most Canadians are putting less into savings overall due to the increased cost-of-living. This creates short-term concerns around not being able to cover unexpected expenses without taking on more debt, as well as long-term concerns with creating a nest egg and retirement planning. This tax filing season, 88% of Canadians said they're relying even more on maximizing their refund to put money back into their pockets and to help build a 'rainy day' fund. The good news for all Canadians is that there are hundreds of existing, new, and enhanced tax benefits and credits to help maximize your refund."

Mixed sentiment around ability to live within financial means: Overall, 37% of Canadians say they're able to live within their income level, and 27% feel good about their personal financial situation. Conversely, almost 3 out of 4 Canadians (73%) say that cost-of-living increases have made it difficult to afford everyday expenses such as groceries, gas, household essentials, etc., and 82% are concerned that their income isn't keeping pace with inflation. One in four (24%) say they struggle to make ends meet, and 64% say that despite making a decent salary, they're worried about paying their bills. Looking ahead, 78% report that they're worried about the cost of living, with 77% who say they plan to reduce their spending (down slightly from 85% in 2023).

Savings are taking a hit: Overall, 79% of Canadians say they have less disposable income than prior years. Around two-thirds of Canadians (66%) feel that they don't have enough money left over from their paycheque at the end of the month to build up their savings. This compares to 30% of Canadians who say they're currently putting money away in savings. A vast majority of Canadians indicate they have a prevailing concern about their lack of savings, with 75% who say they're concerned about not putting enough money into savings (versus 25% who are not concerned), although 54% indicate that they try to ignore the feeling that they need to put more money aside. Looking ahead, 82% say they're likely going to have to put less into a savings account given the increased cost-of-living. Half of Canadians (50%) say they're unable to save money for long-term goals like retirement or a home, as their paycheck goes to their immediate needs.

Canadians indicate they can't rely on savings for unexpected expenses: Nearly half (46%) rely on their credit card to make larger purchases versus tap their savings, and 17% instead rely on installment payment options including buy now pay later (BNPL). More than half of Canadians (57%) worry that they'll have to go into debt or use a credit card if an unexpected expense comes up rather than rely on their savings; for example, to replace an appliance, home repair costs, dental costs, etc. A further 37% worry they'll have to borrow money from family or friends if an unexpected expense comes up.

Perceived new reality of living paycheque to paycheque: When thinking about the prevailing culture of saving in Canada, 73% say that Canadians overall will suffer down the road by not having enough money put aside. Nearly two-thirds (60%) say that today's norm is that people live paycheque to paycheque; however, 26% say that while it's currently challenging to put money aside due to the increased cost of living, they think this will shift down the road as they believe prices will go down.

Canadians top 3 motivations to save include covering unexpected expenses, avoiding taking on debt, and planning for retirement: Canadians cite a mix of motivations in wanting to be able to put money into savings, including:

• For unexpected expenses (73%)
• To avoid borrowing more money using a credit card or loan (70%)
• Put towards retirement (61%)
• To earn interest in a savings account (46%)
• To splurge on something down the road for themselves such as a vacation, new car, or something they want to treat themselves to (43%)
• Save towards buying a home (25%)

Pragmatic view to affordability – if they can't afford, they don't buy: Overall, Canadians appear to take a pragmatic view when it comes to affordability of purchases, with 73% who say that if they can't afford to pay for something from money in their bank - they don't buy it. This compares to 23% who say if they can't afford something with money in the bank, they typically use their credit card or borrow money; 4% rely on installment payments or buy now pay later (BNPL) payment options.

Canadians embrace tax filing to put money back in their pockets: Overall, 81% say that this tax season it's more important than ever to maximize their tax refund and minimize any amount they owe. As Canadians look to file their taxes before the April 30 deadline, 36% expect a refund, 28% anticipate they may owe money, and 24% say they have no idea if they will owe or receive a refund. Only 18% feel confident they have a good understanding of all the hundreds of tax credits and benefits they may be eligible for. Nearly half (46%) say they're relying on a tax refund following a challenging financial year.

Canadians hold a mix of tax-friendly retirement and savings accounts: While many Canadians say they're struggling to put money into savings, they hold a mix of saving and retirement related accounts and plans including:

• Tax Free Savings Account (TFSA): 58%
• Registered Retirement Savings Plan (RRSP): 51%
• Employer sponsored (registered) pension plan: 33%
• First Home Savings Account (FHSA): 4%

Many Canadians plan to put their tax refund towards building their savings or put it in a tax-friendly savings account: When it comes to ways Canadians plan to use their refund, 25% plan to invest in a RRSP, TFSA or FHSA, and 18% plan to start or contribute towards a 'rainy day' fund or savings.

The online survey was commissioned by H&R Block and conducted by Angus Reid Forum from February 23-27, 2024, among a nationally representative sample of 1,505 Canadians.

SOURCE: H&R Block Canada Inc.