Canadians are socking away more money and spending less than people of many other industrialized nations in the current global economic downturn, a new survey suggests.
The push to save is driven in part by a belief among almost one-third of Canadians that the recession will mean a delayed retirement, according to the survey from international bank ING Direct.
The global report released Tuesday suggested 77 per cent of Canadians have saved at the same pace or more in the past six months, which is just one percentage point behind the first-place Austrians.
Overall, Canadians were better savers that people in the United States, which came in third with 72 per cent of those surveyed saying they saved the same or more in the past six months.
However, more Americans had increased their savings than Canadians in recent months.
The survey found 60 per cent of Canadians said they were saving the same amount they did six months ago, while 17 per cent increased their savings. That compares to 47 per cent of Americans who were said they were saving the same sums, and 25 per cent having added more to their piggy banks.
The survey, conducted six weeks ago in nine countries, comes the same day the U.S. Commerce Department said Americans’ personal savings rate fell to 4.6 per cent in June, after jumping to 6.2 per cent in May, which was the highest since February 1995. The rate dropped as low as one per cent at times last year.
That compares to a 4.7 per cent savings rate for Canadians in the first quarter of 2009, down from 4.9 per cent in the fourth quarter of 2008, according to Statistics Canada. The rate was down to 1.9 per cent in the fourth quarter of 2007.
In the ING survey, 23 per cent of Canadians said their savings dropped in the past six months, compared to a 28 per cent drop in the U.S.
Around the world, 65 per cent of people in the United Kingdom maintained or increased their savings in the last six months, followed by 60 per cent of people in France and 59 per cent in Italy.
Italians also had the highest number of people who increased their savings, at 29 per cent, as well as the highest number of people who decreased their savings, at 42 per cent.
ING Direct president and CEO Peter Aceto said Canadians have remained more optimistic about their finances than people in other countries “and they’ve taken charge of their own economic well-being.”
The survey comes as Canada is said to be coming out of one of the worst recessions in its history. Bank of Canada Gov. Mark Carney recently said the recession is over, with the summer quarter expected to produce growth of 1.3 per cent. But Finance Minister Jim Flaherty has cautioned against overly optimistic assessments, warning that Canada will continue to shed jobs even if there is GDP growth.
Clarence Lochhead, executive director of the Vanier Institute, said while the savings figures are encouraging, they don’t discount the increased amount of household debt among Canadians.
The institute did a survey earlier this year showing average household debt soared to over $90,000 in 2008 and annual savings shrank to three per cent of disposable income in 2008, from 13 per cent in 1990. It said the debt-to-net-worth ratio is at its highest level in 44 years.
The recession only worsened the problem with thousands of Canadians losing their jobs, pushing the current unemployment level to 8.6 per cent. Economists say that rate could go higher even as the economy recovers over the next several months and into 2010.
Lochhead believes the recession has changed many Canadians’ thinking about the need to save for a rainy day.
“I hope some of it is a big of a wake up call in some respects to say ‘Maybe in the longer term we ought to be concerned about household spending,”‘ he said.
ING’s study – which surveyed 1,052 Canadians online between May 26 and June 9 -suggested 80 per cent of Canadians were doing things differently to save money by spending less.
For instance, 56 per cent said they cut spending on unnecessary or small luxury items; 50 per cent were using energy-saving tactics such as turning off lights; and 50 per cent were also spending more time at home.
The survey said 60 per cent of families with kids were cutting back or delaying spending on bigger-ticket items such as new vehicles, homes or home renovations. That figure dropped to 40 per cent for families without children.
While 22 per cent of Canadians said they postponed buying a car because of the economic downturn, that was less than in the U.S., Australia, France, Italy and Spain.
About 18 per cent of Canadians put off renovations, fewer than respondent in the United States, Italy and Spain.
Only eight per cent of Canadians surveyed said they have postponed buying a home, less than the U.S., Australia, the U.K., France, Italy, and Spain.
Incentives from Ottawa were likely behind Canadians willingness to buy and renovate homes in recent months. In its budget earlier this year, the government included tax credits of up to $1,350 for home buyers to renovate their house or cottage. It also increased the amount first-time home buyers can withdraw from their RRSPs from $20,000 to $25,000, and implemented a tax credit for first-timers of up to $750 to help cover closing costs.
The ING survey suggested many Canadians were saving more because they were worried about their retirement.
About 29 per cent said they were concerned the recession has taken a toll on their retirement plans. Of those, 33 per cent said they believe they will need to work an additional ten years or more before they can retire.
Still, that’s less than 41 per cent of Americans surveyed who believed the recession will mean working longer before retirement, 40 per cent in Australia, 39 per cent in each France and Italy, 43 per cent in Germany and 48 per cent in Austria.
The online survey was commissioned by ING Direct in Australia, Canada, the U.S., U.K, France, Germany, Italy, Spain and Austria. The same number of people were surveyed in each country.