According to a report released today by BMO, Canadians are in two camps when it comes to saving. One quarter did not put away any savings in 2018, but 15 per cent saved more than $10,000. Canadians are optimistic in 2019, with over half indicating that they are planning to save.

The report, conducted by Pollara, revealed:

• When it comes to this year’s savings plan, half definitely plan to put savings aside (52 per cent), with three in ten (31 per cent) planning to save up to $10,000.
• One in ten believe they will not be able to save anything this year (12 per cent), while more than a third are unsure of how much they can save (36 per cent).
• However, there are some Canadians that have a good chunk nestled away, with 29 per cent of those surveyed claiming to have more than $100,000 saved.
• There are some barriers standing in the way of Canadians hitting their savings goals: 67 per cent of Canadians are stretching themselves too thin on expenses to be able to save; nearly half (45 per cent) are playing catch-up and paying down debt; and, for millennial Canadians, 37 per cent of them cite social pressures as a barrier towards being able to save.

According to BMO Economics, Canadian household credit burdens unexpectedly crept higher in the third quarter of 2018, with the key debt-to-disposable income ratio climbing to a near record high of 173.8 per cent. Meanwhile, with interest rates on the rise, credit payments are now starting to take a chunky bite out of paycheques. The household debt service ratio (interest and principal as a share of disposable income) has jumped to 14.5 per cent, with 7.22 per cent of income being put toward interest payments – the most in seven years.

However, debt burdens are also alleviating, with household credit slowing.

“Household credit is now rising the least in 35 years, and with consumers expected to spend at the slowest rate in a decade in 2019 due to higher interest rates and tougher mortgage rules, the debt ratio should stabilize if not fall modestly,” noted Sal Guatieri, Senior Economist, BMO Capital Markets. “There’s no better time to tighten the fiscal purse strings than when interest rates are on the rise.”

“The current environment is putting some pressure on Canadians’ finances, making it more difficult for them to put a greater emphasis on regular saving,” said Carola Corti, Managing Director, Everyday Banking, BMO Bank of Montreal. “However, it is encouraging to know that Canadians are coming into 2019 with saving top of mind – it’s critically important to prioritize putting money aside, even in smaller amounts. One of the best places to start is with a comprehensive plan that takes into account income and expenses, as well as long and short term goals. Once that plan is in place, it will be much easier for Canadians to begin building momentum as it relates to household savings.”

Battle of the piggybank: short-term vs. long-term savers
The study also looked at how Canadians want to use their savings. While some Canadians are looking to tap into savings in the coming year, others have a longer-term horizon:

• For Canadians that are looking to dip into savings this year, 47 per cent are looking to use their savings for a trip or vacation, nearly 20 per cent need the money for home renovations, and 15 per cent are saving for seasonal activities like holidays or birthdays.
• For those that are trying to save for the longer-term, 36 per cent have their eyes turned towards retirement although 32 per cent don’t think they are saving enough. Another 36 per cent are setting money aside for an emergency fund but, similarly, close to 40 per cent feel it’s not sufficient.
• For Canadians that have taken on debt, 17 per cent are focused only on getting back to the black.

Ms. Corti noted that for those looking to increase their savings in 2019, a good place to start is with a plan that incentivizes saving more. With BMO’s Savings Builder Account, Canadians can earn higher interest on their savings each month for increasing the amount contributed. Additionally, those who open a new Premium Plan Chequing account, along with a BMO Smart Saver Account, can earn a bonus 3.25 per cent interest on funds for 90 days.

For more information on BMO Savings Accounts or for help getting started with saving, visit: https://www.bmo.com/main/personal/bank-accounts/savings/