More Canadians saving money
People becoming cautious with cash due to downturn in economy, survey shows
OTTAWA — A study released Wednesday shows the economic downturn is prompting more Canadians to sock away money. A survey by HSBC Bank Canada indicates 84 per cent of Canadians have some money put away for the future or for an emergency, up from 67 per cent when a similar survey was done in 2006.
The survey of 1,000 people — done in February by Opinion Search on behalf of HSBC — showed people in Alberta were most likely to save, at 92 per cent. The Atlantic region had the lowest savings rate at 77 per cent.
British Columbia was in line with the national average, with 84 per cent of respondents indicating they had some money put away. Manitoba and Saskatchewan were both at 89 per cent, Ontario was at 86 per cent and Quebec was at 80 per cent.
“It is not surprising that Canadians are becoming increasingly cautious about not only how and when they spend their hard-earned dollars these days, but also how and where they save,” Rick Kelln, senior vice-president of HSBC Bank Canada, said in a statement.
Kelln said the survey showed increased awareness of the types of saving plans available, such as new tax-free savings accounts (TFSAs). The poll showed 88 per cent are aware of TFSAs, which were launched by the federal government this year, and 68 per cent plan on participating in one.
Of those planning to open a TFSA, the survey showed 70 per cent intended to use it for general savings or retirement, while 23 per cent viewed it as a place to put emergency funds.
Younger respondents, or those between the ages of 18 and 34, were more likely to use a TFSA for general savings, emergencies or education, while those between 35 and 54 saw it more as a way to save for retirement, HSBC said.
Pedro Antunes, an economist with the Conference Board of Canada, said his organization’s own research indicates a higher degree of savings right now. The board is forecasting that Canadians will save 4.1 per cent of their income this year, up from two per cent in 2005 and 2.7 per cent in 2007.
While the bad economy may be prompting Canadians to save more, Antunes said this actually harms the economy in the short term by decreasing consumer spending, which has a negative effect on GDP and employment. “Certainly, the recession wouldn’t have been as severe if consumers had kept spending,” he said. “If you’re talking about the economic cycle, certainly this savings comes at a bad time in the sense we’d be better off to see consumers back spending in the short term.”
However, he added that a higher rate of savings can have positive — albeit “marginal” — longer-term economic effects by increasing future wealth and investment income.