Rob Carrick – Globe and Mail

October 24, 2023


If you were to pick a dominant theme in Canadian personal finance, you could do a lot worse than debt.

We’re among the world’s leaders in taking on debt to buy houses and other stuff. We might be better at it than hockey, maple syrup production and snow shovelling.

What we’re not especially good at is saving. Yet in a recent survey of 5,736 households, 62.7 per cent of participants chose “saver” as their dominant money personality. “I am surprised by that number,” said Eloise Duncan, the chief executive and founder of the non-profit Financial Resilience Institute, which conducted the survey. “It’s a fascinating result.”

A saver is defined by the institute as someone who gets satisfaction from watching their money grow as a result of discipline and vigilance. There’s a temptation to use the word “delusional” to describe the overwhelming percentage of people who chose this as their money personality, but that’s harsh. “Aspirational” is the better choice.

People answered the question about money personality as they want to be seen, and that’s a positive.

It tells us that in a country of heavy spending, some of it discretionary and some of it unavoidable owing to high living costs, there is still a recognition that saving is vital. Maybe we can get back there someday, after inflation dies down and interest rates ease.

The money personality survey allowed people to pick more than one choice for their dominant trait, which is how we end up with 38 per cent picking “spender” and 22.4 per cent choosing “money avoider.” Another 9.1 per cent chose “caretaker,” which means someone who uses money as a way to protect or control. Close to 6 per cent chose “risk taker,” and 4.7 per cent chose “money monk.” That means you prefer not to engage with financial matters and rely on others to look after things.

Ms. Duncan’s surprise at the share of people who see themselves as savers first is based on a few data points the Financial Resilience Institute has gathered. For example, 37 per cent of the population had a negative or zero household savings rate as of June, 2023.

“I do think there are some people that like to think that they’re savers, but it’s not necessarily happening in action,” she said.

Inflation and high rates are a conversation-ending excuse for not saving right now. For households struggling with money, it’s a win to avoid going into more debt. Saving can be dialled down or put on temporary hold.

But the Canadian openness to spending predates today’s financial difficulties. While it has plateaued lately, the ratio of household debt to disposable income has soared since the 1990s and most recently hit 180.5 per cent. This means there was almost $1.81 in debt for every dollar of household after-tax income.

This ratio is an abstract that mashes together people who have lots, little and no debt. But it’s useful for comparing today’s situation against the past and comparing Canada with other countries. On that count, Canada looks like a very spendy country.

Our household debt levels are the highest in the G7 group of industrialized countries. The Organization for Economic Co-operation and Development says our debt-to-income ratio is lower than those of eight other countries but higher than those of a group of 27 others that includes the United States and the United Kingdom.

The savings rate in Canada is not too bad by our standards at 5.1 per cent, according to the latest Statistics Canada tally. The savings rate five years ago was practically nothing. It soared during the pandemic and has been easing off since then.

Preaching about saving after a surge in the cost of borrowing and the cost of living is problematic, but let’s proceed anyway. First, today’s high rates make this the best time in decades to save and earn risk-free interest. Second, there’s a connection between having some savings and being financially resilient.

The institute reports that 69 per cent of people who described themselves as savers qualified as financially resilient or approaching resilience, compared with less than 50 per cent for spenders and 30 per cent for money avoiders. Resilience is described as the ability to handle financial shocks as a result of unplanned events.

Recent numbers on consumer spending document a slowdown from peak levels after pandemic lockdowns eased. This trend is driven by higher debt and living costs, not a cultural shift to saving.

But let’s not rule out a higher savings rate. Maybe Canadians will start putting their money where their mouth is.