A new survey from FP Canada finds a growing number of Canadians aren’t confident they’d be able to withstand a sudden financial shock.
According to the latest FP Canada Cross-Country Checkup, a survey commissioned by FP Canada every two years, 39% of Canadians say their bank accounts couldn’t withstand a financial emergency — up from 33% in 2018.
Respondents aged 45–54 were the most pessimistic, with more than half (53%) reporting they wouldn’t be able to deal with a financial emergency.
The inability to cope with financial shocks could be partly explained by a low rate of savings among respondents: 37% said they rarely or never put money into an emergency savings account.
However, as a result of the pandemic, the household savings rate is far greater than ever before, says a new report from CIBC Economics.
“Covid-19 has triggered the largest cash accumulation in recorded history,” the report stated.
According to CIBC, although labour income in Canada plummeted by $100 billion in the second quarter, government transfers increased by almost $225 billion, and other government benefits — including pandemic emergency programs — grew by $151 billion.
“That spike in disposable incomes coincided with a notable decline in spending, which resulted in the savings rate surging from 3.6% to 28.2% as of June,” the CIBC report stated.
The excess cash can likely be attributed to mid- to high-income households.
“[T]he vast majority of job losses since February were amongst low-income Canadians,” the report said. “And those households did not reduce their consumption dramatically, given that a large portion of their income (be it government transfers or wages) goes to necessities.”
The report noted that the Canadian savings rate likely fell to 13% in the third quarter — “still miles above the 3.6% level seen prior to the pandemic” — and will likely remain elevated throughout the winter amid the second wave of Covid-19.
“The coming [four to five] months will see a notable slowing in consumer spending growth, while income levels will remain relatively elevated,” the CIBC report forecast.
FP Canada commissioned Leger to conduct an online poll of 1,538 respondents from Sept. 18 to Sept. 20, 2020. Online polls can’t be assigned a margin of error because they don’t randomly sample the population.