A majority of Canadians plan to continue spending less while saving at higher levels than they did before the pandemic, but are worried that inflation and the rising cost of housing could prevent them from doing so, according to a new survey.
The Scotiabank survey, which focuses on money habits and was last conducted in the spring, found this time that 63% of Canadians polled don’t plan on spending the way they did before the pandemic, while 55% are concerned they won’t be able to save the way they were able to during the pandemic.
D’Arcy McDonald, Scotiabank’s senior vice president of day-to-day banking, said he was surprised that such a large portion of respondents planned to continue spending less. The survey suggested 53% of Canadians polled plan to cut back even more on spending.
“If you talked to me in the spring, I would’ve told you that when restrictions lift and restaurants, patios and travel resumes, that this watershed of savings would be unleashed onto the economy, but that’s not true,” said McDonald.
“Canadians are still embracing the budgeting habits they acquired during the pandemic.”
Th survey also noted that 42% of respondents are feeling worried about their personal finances. Around 84% of those respondents stated they were feeling the same or more anxious today than they did at the onset of the pandemic. Further, 81% of Canadians polled are concerned about the increased cost of living and how that affects their financial situations.
McDonald said inflation, rising real estate and rent costs, and higher interest rates could be some of the reasons people feel their ability to save will be hindered in the coming months.
However, according to the latest Monetary Policy Report from the Bank of Canada that was released this week, Canadian consumers aren’t planning a drastic retreat on spending.
That report found Canadian households are expected to spend 20% of the extra savings they’ve put away during the pandemic on consumption in the coming months, as most public health restrictions will be eased by the end of this year.
As it relates to inflation, the central bank projected in its report that it will “ease” to approximately 2% by the end of next year, as pressures brought on by supply-chain disruption and higher energy prices are expected to “dissipate.”
However, inflation is projected to “rise modestly” in 2023, as the economy “moves into excess demand,” the report stated.
When it comes to the day-to-day lives of Canadians, Scotiabank’s McDonald said the return to working in offices will also add a significant cost to people’s lives.
“You can’t underestimate the real savings that remote working is creating for people,” he said, adding he realized the impact after commuting to downtown Toronto for the first time in a while recently.
“I spent $10 on my GO Train ticket, two coffees for $5 a piece, and grabbed a beer after work, and not doing that at home, that saving is still very real.”
Jason Heath, a certified financial planner and managing director of Objective Financial Partners, said the change in how Canadians save is enormous.
Immediately before the pandemic, the household savings rate hovered around 3%, according to data from Statistics Canada. By mid-2020, it skyrocketed to 28.2%, and most recently was at 14.2% in July 2021.
McDonald said Canadians have realized the benefit of saving more and carrying less credit, which is why they show a desire to continue spending less in the future.
But both Heath and McDonald say young people in particular will face difficulties saving at the same rate.
“A big part of it has to do with a lot of young people who are looking at the price of real estate, and those prices have gone gangbusters since the pandemic began, and rents have gone up,” said Heath.
“So I think there are a lot of young people looking ahead trying to figure out how they’re ever going to afford real estate, have a family and save.”
The Scotiabank survey polled 1,507 Canadians and was conducted by Maru/Blue from Sept. 10 to Sept. 11. The margin of error was not stated.