Canadians not ready for downturn

RBC has released a report on the saving and spending habits of Canadians, apparently we’re saving less than ever, with more Canadians relying on credit cards, loans and mortgages.

Canadians are not prepared – and not preparing – for a rainy day, like an economic downturn, a major bank is warning.

The vast majority of Canadians admit they’re poor savers, with barely one-half having a rainy-day account. And of those, only half have enough to cover a month’s expenses, RBC said Wednesday in releasing results of a spring survey of the saving and spending habits of Canadians.

“One need only look at the newspapers or television to see that North America is in an economic downturn,” said Ashif Ratanshi, senior vice-president, RBC Branch Investments and Banking.

“This is the time for Canadians to re-assess their own finances and ensure they are effectively managing their money so that they can withstand any sudden pitfalls or changes in their lives.”

I’ve already run a poll on savings and income that indicates most readers here are in the minority, but since the RBC reports refers specifically to a rainy-day account I’ll pose this question:

[poll=23]

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DLA
DLA
12 years ago

I agree with Anonymous. I think the notion of having an emergency fund is a bit antiquated. Keeping anything over $5,000.00 in a supposedly "high interest" savings account which is actually below the actual rate of inflation is foolish. However, the real issue is managing personal debt (i.e., no high interest rate cards "whether platinum or gold", accepting the limitations of your buying power and most importantly knowing the difference between need and want). All lessons most of us have had to learn the hard way.

Anonymous
Anonymous
12 years ago

I don't know if I understand what constitues an emergency savings account, but I'm imagining something highly liquid, that loses purchasing power over time. I think of my untapped HELOC as my emergency fund. It serves the same function, but costs nothing. If I lose both jobs, can't find another, my HELOC is frozen, I can't sell or rent my house and I've burned through my RRSPs and other assets, then a rainy day "savings account" probably wouldn't make much difference. As long as I have credit avaiable, I don't see any reason for emergency savings. Long term savings sure, but not emergency savings. I would only put up with inflation and taxes eroding my earnings in an emergency "savings account" if I anticipated a reasonable high likelihood of needing the money very soon. Wouldn't that explain the findings? Many… Read more ยป

Deliverator
Deliverator
12 years ago

The question isn’t “How much of your portfolio is in cash?”, it’s “How much money do you have saved, period?”

Actually, the question was:

Do you have a ‘rainy-day’ savings account for emergencies?

That, IMHO, reads a lot like 'cash' to me. It would not include investments like stocks, bonds, mutual funds, etc. That was the subject of a survey a couple of months back, IIRC.

Aleks
Aleks
12 years ago

How much to keep in an emergency fund is a separate discussion, but the fact that you're even considering it probably puts you in the "six months or more" category. The question isn't "How much of your portfolio is in cash?", it's "How much money do you have saved, period?" Half the population has nothing saved, and another quarter only have enough for one month's expenses. When you start quibbling over whether to keep $5000 or $10,000 in a savings account, you're already in the 90th percentile at least.

Deliverator
Deliverator
12 years ago

When you refer to a rainy-day account, what is that exactly? I have plenty of assets and zero debt, but I don’t see the point in holding too much money in some “high interest” savings account which is really being eroded by inflation.

I would concede your point, Warren, but it still makes sense to have a couple of months (at least) expenses in cash (or some other highly liquid asset) quickly available for emergencies.

Warren
Warren
12 years ago

When you refer to a rainy-day account, what is that exactly? I have plenty of assets and zero debt, but I don't see the point in holding too much money in some "high interest" savings account which is really being eroded by inflation.

Drachen
Drachen
12 years ago

patriotz

"…higher taxes and higher cost of living right across the board (Germany…"

I've lived there and I can tell you the taxes are higher but the cost of living is lower. Scandinavia as well I believe.

But more importantly for families starting out both have subsidized daycare (free through most of Scandinavia I believe).

Michael Randallbard
12 years ago

<a>Lest We Forget a Certain Little Bet

patriotz
patriotz
12 years ago

Pre-sale buyers (at the Anvil) have received letters from the developer saying they have 14 days to decide whether they want to pull out and get their deposit back or pay the additional costs.

Is that a no-brainer or what? ๐Ÿ™‚

Take the money and run.

blueskies
blueskies
12 years ago

And perhaps, Bill Good, Muir, Pastrick, and the VANOC mob, should administer the plan.

…like having the coyotes design the security system for the chicken coop..

-A-… you sl-A-y me ๐Ÿ™‚

--A-
--A-
12 years ago

"Maybe the Urban Development Institute representing the developers … should have a mediation process. Maybe there should be somebody there to look after the consumer," Rennie said."

Sure Rennie, perhaps we should have a process in place whereby if the flippers make money they keep it, if they lose money the taxpayer picks up the tab.

And perhaps, Bill Good, Muir, Pastrick, and the VANOC mob, should administer the plan.

exx
exx
12 years ago

Here's the CBC article to the Anvil that macchiato posted above.

"United Properties, the developer behind The Anvil in New Westminster, has run out money, and that means pre-sale buyers are being asked to pay an additional $20,00 to $40,00 if they want to keep their condos."

Re-diculous
Re-diculous
12 years ago

Garth Turner has posted "Condo Crack" refering to his Bill Good interview this morning

http://www.greaterfool.ca/2008/05/21/condo-crack/

…am I reading this correctly? Looks like pumper-Bill was RENTING a 1.6 million dollar unit which he was foced out of because the owner wanted to sell. LOL

blueskies
blueskies
12 years ago

And of those, only half have enough to cover a month’s expenses”

i read somewhere that the median savings on an individual basis was merely $2500… a little scary

patriotz
patriotz
12 years ago

The plain fact is that there are countries with higher taxes and higher cost of living right across the board (Germany, Scandinavia for example), or much lower incomes (Asia) which have higher savings rates than us.

If people choose to save they will save. It's a matter of priorities. That's all there is to it really.

And it would have been interesting if that study had broken out results by province. I think BC would probably be the worst by a mile. Remember our -8% savings rate.

I think this province has set itself up for a clobbering in the upcoming recession.

emile
emile
12 years ago

sin tax ???

Brittanny Spears
Brittanny Spears
12 years ago

"Canadians are poor savers" Can't imagine why this is? It must be mostly because of our extravagant lifestyles. I don't think it has anything to do with:

– real estate prices

– gas prices

– food prices

– income tax

– banking costs

– sin tax

– GST

– energy costs in general

– inflation

– etc. etc. etc.

Drachen
Drachen
12 years ago

Ted

"Pathetic!"

Arrogant prick!

macchiato
macchiato
12 years ago

'nother one bites the dust:

http://www.liveatanvil.com/

they are asking pre-sale buyers to buck up 20-40K more or else have their deposits returned.

they are apparently reputable: http://www.udi.bc.ca/

--A-
--A-
12 years ago

Problem is almost everyone I know has become an Economist of Nobel Prize rank.

They reason….everyone wants to live here, and we have natural resources to boot.

No RE Bubble, no commodities bubble, yeah okay.

My view: we have a commodity bubble, a RE bubble, and a credit bubble to boot!

Anonymous
Anonymous
12 years ago

Why save with so much credit available?

read on
read on
12 years ago

worrying, more like

well, not for me, but for them

Ted
Ted
12 years ago

"And of those, only half have enough to cover a month’s expenses"

Pathetic!