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Canadian Saving and Spending Habits are Changing

Nov. 14, 2012
3 mins
A woman hands the customer her credit card back

Canadian families are finding it increasingly difficult to save for the future, leading to a decrease in spending and savings. According to a recent survey, although the majority of Canadians are still saving for the future, a lot of families have reined in their spending habits since the financial crash of 2008.

Spending Less, Saving Less

The survey, conducted by Leger Marketing, found that Canadian families have developed new spending and savings habits post-recession. According to the survey, 43% of Canadian families have cut back on spending, while 35 % are saving less. Although the worst may be over, don’t tell that to Canadians – they remain cautious about money management, despite low interest rates.

Even with debt reaching record levels – the debt-to-income ratio climbed to a new high of 163.4% in the second quarter – there’s a silver lining. The survey found nine out of 10 Canadians have some form of savings, although 72% also have debt. It seems as though Canadians are stuck between a rock and a hard place – while the future seems rosy, the recent economic crash was a reality check, resulting in tighter management of the family budget.

Financial Balancing Act

Canadians with a steady paycheque are trying to carefully manage their money today, while not forgetting the future. "This research tells us that for many Canadian families, ensuring the everyday quality of life has to be very carefully balanced with looking to the future," says Barry Columb, President of President's Choice Bank in a release to the press. "While definitely concerned about tomorrow, many people are also focused on making the most of their money today."

Types of Spenders and Savers

The survey found most Canadians fit into one of four types based on their attitude and behaviour about money: Practical Spenders, Practical Savers, Aspirational Savers and Aspirational Spenders. The majority, 30%, consider themselves as practical spenders – perhaps a sign the low cost of borrowing is too tempting to pass up. Coming in a close second is Practical Savers (22%), followed by Aspirational Savers (17%) and Aspirational Spenders (7%). This just goes to show that Canadians are more concerned about maintaining their family’s finances today, over worrying about the future.

The Future Looks Bright

Despite cautious money management, most Canadians are optimistic the economy is improving. According to a recent Scotiabank poll, 49% of respondents are optimistic about the economy – a major rise from 39% last year. With the Bank of Canada hinting that an interest rate hike is likely in the not-so-distant future, Canadians seem to have taken that as a positive sign that the economy is returning to normal.

A Wait and See Approach

It isn’t all good news for investors. 62% responded that staying the course with their market position was the best financial strategy. This view is understandable in this economic climate, with companies sitting on record levels of cash and major indices like the S&P/TSX Composite remaining relatively flat over the past two years.

Market Volatility scares away Conservative Investors

The poll also found the state of the economy (72%) and fluctuating market conditions (71%) have kept some investors away. Despite low interest rates, 29% are sleeping better at night with safer investments like GICs and Money Market funds until markets improve. These sentiments don’t look to change anytime soon – although we’ll know soon enough about the U.S. fiscal cliff, much uncertainty remains in the market with respect to Europe’s debt situation and China’s slowing growth. Fluctuating markets don’t look to be going away anytime soon.

Sean Cooper

Sean Cooper is the author of the new book, Burn Your Mortgage. He bought his first house when he was only 27 in Toronto and paid off his mortgage in just 3 years by age 30. An in-demand Personal Financial Journalist, Speaker and Money Coach, his articles and blogs have been featured in publications such as The Toronto Star, Globe and Mail, Financial Post, Tangerine: Forward Thinking blog and TheDot. You can follow him on Twitter @SeanCooperWrite.

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