A lingering question is whether the events of the past year have forced Canadians to save more. Two studies released from different institutions have reached different conclusions.
According to RBC/Ipsos poll of 1,000 Canadians, people are actually saving less than they were before.
The survey found that one-third of Canadians (34%) indicate they are saving less money than they have in the past, with only one in five (19%) saving more money.
“While we all 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,” says Ashif Ratanshi, head, branch investments, deposits and direct investing with RBC.
What is the most surprising is that older Canadians are saving less, a reversal of previous trends. The poll found that 38% of Canadians over age 35 are saving less than they have in the past, whereas Canadians under age 35 have apparently ramped up their saving. Only 1 in 5 of those under age 35 said they are saving less.
“With older Canadians — including boomers — even if they are saving directionally less than before, it still might be a significant amount of dollars,” Max Thompson, head of GICs and savings with RBC, told Advisor.ca. “I think boomers are probably trying to get their balance sheet in order and probably using some disposable income to pay down some of their higher-cost debt versus investing it or attaining a higher savings rate. If you have some high-costing debt, you should probably get that done first.”
Thompson suspects the life-transitioning of younger Canadians, in the generation Y and X demographics are probably forcing them to save more.
Two-thirds (66%) find it difficult to set up a dedicated savings program and nearly six in ten Canadians (59%) find it a challenge to stay focused on saving money.
“Inferring on the results of the poll, it was good to see that gen X and Yers are saving more. We would like to think they are being disciplined and are saving for large life events, like marriage or their first home,” Thomspons says. “Sixty-three percent of Canadians find keeping track of monthly expenditures easy, so they are half way there. The other part of the equation is knowing what to do with what you have left over.”
The poll shows Canadians find it difficult to save above and beyond monthly expenditures. Two-thirds (66%) find it difficult to set up a dedicated savings program and 59% find it a challenge to stay focused on saving money.
Sun Life poll sees Canadians tightening their belts
A survey conducted by Fleichman-Hillard on behalf of Sun Life of 1,200 Canadians, found definite signs of increased saving.
Sun Life Financial’s Canadian Unretirement Index found 60% of Canadian workers have reduced their debt, with almost the same number (59%) saying they have spent less since January.
“In December 2008 we saw that many Canadian workers were conflicted about their retirement prospects, but now, almost a year later, there’s an increased confidence in their ability to save enough for certain things like basic living and medical expenses,” says Dean Connor, president of Sun Life Financial Canada. “According to our survey, paying housing expenses is the number one financial priority of Canadian workers until about age 51, when retirement saving takes over as the top priority.”
Not only are Canadians saving more, they are also feeling more confident about their retirement prospects as a recovery in markets takes hold. More respondents are anticipating that they will not be working longer than they originally intended, and more Canadians believe their retirement will be as comfortable as they had hoped, compared with December 2008 — the last time the Index was conducted.
According to the study, 55% of Canadians now believe they will retire at age 66, up from 51% in December 2008, while 45% believe they will be working either full-time or part-time past age 66. Canadians had mostly positive reasons for intending to work past the traditional age of retirement, such as remaining mentally active and the enjoyment of their career.
The survey also found that Canadians who use a financial advisor are more confident in their futures: 86% of those who work with an advisor feel they are making better decisions about their finances. Only 37% said they now expect to work longer than originally expected, compared with 48% of those without an advisor.
“These findings are in line with the feedback we have received from clients,” says Connor. “Unfortunately, half of those surveyed don’t work with an advisor and they’re really missing out on some valuable guidance and peace of mind.”
(10/22/09)