How Much Does The Average Canadian Have In Savings?

Personal savings are the least prioritized aspect of our finances, especially, when we do not have any financial saving goals. Even if we set our future goals, most of us are not able to comprehend or calculate the savings we would need in order to achieve those goals. 

For many of us millennials living in Canada, it is common practice to live, paycheck to paycheck, without being able to save anything. This leaves Canadians vulnerable to many unforeseen financial circumstances. 

Therefore, it is essential for all to save as much as possible from their disposable income. By having savings in place many financial setbacks can be averted and in many cases, life becomes a lot easier to manage once you retire. 

The average Canadian tends to save very little of his/her income. This is especially true for the younger generation. In this article, we will discuss healthy saving habits that can help Canadians achieve their financial goals. 

How much does the average Canadian save per month?

According to Statista, average Canadian savings fluctuate from year to year based on many factors such as the economy, government policy, and other external variables. However, on average Canadian’s save about 7.61% of their total monthly disposable income. Disposable income is the leftover amount from a person’s current income after paying taxes.

So, for example, if the average monthly disposable income of a Canadian citizen is $5417 CAD, they should on average be saving around $412 CAD. In the past decade, average savings have fluctuated considerably due to global economic crises including the 2008 recession and more recently the outbreak of the Covid-19 pandemic. 

Factors Influencing Higher Savings in Canada

1) Global Pandemic

Since the start of the global pandemic, economic activity around the world has seen downward trends. Many businesses have reported huge financial losses and decreased turnover. However, at the same time, many industries have also thrived amidst the pandemic. 

Canada with its strong government policies and social programs has been one of the least impacted countries post-outbreak. Not only has the economy remained stable, but if anything, the standard of living has gone up for Canadians. They are saving a higher percentage of their annual income. The savings rate has jumped to 28.2% from 3 percent in the last quarter of 2020. 

However, the increased savings during a pandemic can simply be attributed to the volatile nature of the global economy. With investors being circumspect, many have opted for safe saving options to help out with emergency funds, paying off any outstanding debts, and keeping up with monthly expenses to pay for bills and utilities in the future.

2) Rising Income & Reduced Spending:

The average income of Canadian citizens has increased in the past decade from approx. $45,000 in 2010 to over $60,000 by the end of 2019. 

However, it can also be argued that average incomes adjusted for inflation are actually lower during this period. 

The increased average income levels can also be attributed to higher minimum wages and more skilled job opportunities being made available to Canadians.

3) Age:

The median age in Canada is 40.9 years. This demographic trend shows a population that is getting old. At this age most people have already started retirement planning, so they tend to save more to achieve their retirement goals. As a result, a maturing population has helped the savings rate to rise.

4) Economic Uncertainty:

With a gloomy economic outlook in recent months, people have reduced their monthly spending and started saving money that was previously used for discretionary spending. This economic uncertainty has resulted in decreased consumer spending and increased savings.

5) Government Policy:

The government has tried to mitigate the adverse economic impacts of the global pandemic by introducing a number of incentives and policies to safeguard jobs and businesses. Tax breaks, subsidies, grants, transfer payments, and more have been introduced to help people and businesses stay afloat in these uncertain times.

The closure of public places and recreational spots during the pandemic has also helped in reducing unnecessary public spending. Thus, increasing the amount of money being saved.

What Is The Average Retirement Income In Canada?

The Canadian Pension Plan is a public retirement income system that provides a monthly, taxable benefit. It essentially offers a monthly payout after you retire that is derived from the money you have earned and saved during your working career. 

The average monthly payout by the CPP for Jan-Dec 2021 is $706.57 with the maximum payout being $1,203.75 at the age of 65. The maximum payout is received by people who contribute more to the CPP during their careers.

This leaves a large proportion of retired Canadian people with a smaller pension income as they often do not earn enough to get the maximum payout. That is why it pays to have other retirement planning options.

As of the 2017 Canadian Income Survey, the average retirement after-tax income of a Canadian family headed by an individual over 65 years old was $61,200. While single-household retirees had a median after-tax income of just $27,500.

What Are The Options For Retirement Planning?

There are many options available when it comes to retirement savings. The Registered Retirement Savings Plan is one such option. It offers a more conventional path towards a safe and secure retirement. 

Nevertheless, there are more options to choose from when it comes to saving money for retirement. These methods are often unknown to an average Canadian and include options such as TFSAs, and RRSPs. That is why it is always advisable to consult with a financial advisor or financial planner when planning for retirement.

Remember to always check that the method you are choosing is verified and trusted. Also, try to get feedback and reviews from people who are using these financial products.

How Much Do You Need To Retire At 55 In Canada?

Peacefully living in retirement is everyone’s dream. The retirement age in Canada is between 60-70 years but some people may have goals or plans to retire earlier.   

If you want to retire at the young age of 55, then you might need a budget planner/financial planner to help you calculate just how much you would need to save in order to meet that goal.

Financial planners will take into consideration your source of income and standard of living to help you better organize your finances. It might not seem practical but financial planners are instrumental in devising a path and a plan that leads to your set retirement goals. 

How Much Do I Need To Retire In Canada?

The amount of money in savings to retire will vary from individual to individual. It will depend on your current living standards and the way you want to live your retirement life. You should plan on how you want to spend your retirement.

A retirement planner can help you to conceptualize how your income, savings, and future goals can affect your retirement needs.

Financial experts point out that your monthly income after retirement should be equal to or at least 70% of the income you are earning currently, to live a peaceful retired life.

For Canadians who have a mortgage in retirement, it is a must to have retirement income that is equal to their annual working income.

For more insurance and financial advice check out Worthy Financial. Based out of Nova Scotia, Canada, they specialize in providing financial advice that can help you better secure your and your family’s future.