H&R Block Canada reveals 66% can't meet saving goals, as living expenses outpace incomes
A survey conducted by H&R Block Canada sheds light on the evolving dynamics of saving habits among Canadians, revealing that a significant 66 percent of the population feels challenged in accumulating savings.
This survey, focusing on the personal financial sentiments of Canadians, highlights a considerable deviation from the commonly recommended savings guideline, which suggests allocating 20 percent of one's paycheque towards savings.
A staggering 43 percent of Canadians disclose they do not allocate any portion of their income to savings. Within this group, 31 percent attribute their inability to save to the absence of leftover funds after meeting essential expenses, and 12 percent indicate their earnings do not suffice even the basic cost of living requirements.
Among the Canadians who manage to save, 39 percent save less than 10 percent of their income, while merely 19 percent manage to save the advised rate of 20 percent or more.
Yannick Lemay, a tax expert at H&R Block Canada, expresses the prevalent concern among Canadians regarding their insufficiency in savings, a situation aggravated by the escalating cost of living.
Despite a variety of tax-advantaged saving options available, such as Registered Retirement Savings Plans (RRSPs), Tax-Free Savings Accounts (TFSAs), and First Home Savings Accounts (FHSAs), the general trend indicates a reduction in savings contributions.
Lemay highlights the immediate financial anxieties related to unforeseen expenses and the long-term apprehensions concerning retirement planning.
Notably, 88 percent of Canadians are increasingly depending on their tax refunds to enhance their savings, indicating the significance of maximizing refunds through the multitude of tax benefits and credits available.
The survey further reveals a mixed perspective on financial management, with 37 percent of Canadians confident in their ability to live within their means, and 27 percent satisfied with their financial situation.
In contrast, a considerable 73 percent struggle with the rising cost of living affecting their ability to afford daily necessities, and 82 percent are concerned about their income not keeping pace with inflation.
A significant portion, 78 percent, expresses worry over future living costs, with 77 percent planning to reduce their spending.
The insights into savings reflect a concerning trend, with 79 percent of Canadians reporting a decrease in disposable income compared to previous years. Approximately two-thirds, 66 percent, express that they lack sufficient funds at the end of the month to contribute towards savings.
This sentiment is echoed by 75 percent of Canadians who are worried about not saving enough, although 54 percent attempt to overlook these concerns. Looking ahead, 82 percent anticipate a reduction in their savings contributions due to the increased cost of living.
Half of the population states that their paycheque is primarily allocated to immediate needs, hindering their ability to save for long-term goals such as retirement or homeownership.
The reliance on alternative financial means for unexpected expenses is evident, with nearly half (46 percent) choosing credit cards for larger purchases over tapping into their savings, and 17 percent opting for installment payment options, including buy now, pay later (BNPL) schemes.
More than half of Canadians (57 percent) worry about resorting to debt or credit cards for unexpected financial needs, and 37 percent fear the necessity to borrow from family or friends.
Reflecting on the broader saving culture in Canada, 73 percent of respondents foresee negative long-term effects due to insufficient savings.
A prevailing sentiment among 60 percent identifies living paycheque to paycheque as today's norm, yet a hopeful 26 percent believe this challenge is temporary and expect an eventual decrease in living costs.
Canadians' motivations for saving are diverse, prioritizing covering unexpected expenses, avoiding additional debt, and planning for retirement.
Despite economic hurdles, 73 percent adhere to a pragmatic approach towards spending, refraining from purchases they cannot afford without resorting to credit. This cautious spending behavior underscores a broader commitment to financial prudence among Canadians.
As tax season approaches, 81 percent of Canadians stress the importance of maximizing their tax refund, with 36 percent anticipating a refund and a similar proportion uncertain of their tax outcome.
This scenario underlines a gap in awareness regarding eligible tax credits and benefits, with nearly half relying on their tax refund to navigate through financially challenging times.
Despite the struggle to enhance savings, Canadians maintain a variety of savings and retirement accounts, underscoring their intent to secure their financial future. This tax season, a portion of Canadians plans to invest their refunds into RRSPs, TFSAs, or FHSAs, and to contribute towards a “rainy day” fund, highlighting the critical role of tax filing in personal financial management.
