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Posthaste: What are Canadians doing with that massive mountain of savings? — not putting them into RRSPs

Financial Post logo Financial Post 2021-02-11 Pamela Heaven
In the third quarter of 2020, Canadians were saving 14.9% of their disposable income, compared with 3% in the same time period the year before.  © Provided by Financial Post In the third quarter of 2020, Canadians were saving 14.9% of their disposable income, compared with 3% in the same time period the year before.   a close up of a sign

Good Morning!

It’s RRSP season, and with household savings in Canada at historic highs, you might think it would be a bumper year for these time-honoured retirement savings vehicles.

Not so, says recent research. According to a poll taken in mid-January by Edward Jones, 52% of Canadians said they do not plan to contribute to their RRSPs this year. Of these, 44% gave the reason that they could not afford to because of the effects of the pandemic.

Of the 31% who said they would contribute to RRSPs, only 31% of them plan to invest the maximum amount. (RRSP deadline is March 1, so people still have time to change their minds).

Canada’s household savings rate is at the second highest since the early 1990s as locked-down residents with little to spend their money on, squirrel it away. In the third quarter of 2020, Canadians were saving 14.9% of their disposable income, compared with 3% in the same time period the year before.

But Edward Jones says the economic uncertainty of the pandemic has played an important role in why Canadians are choosing to save their money.

“What the research shows is that Canadians have had to make financial compromises like deferring retirement contributions for other more immediate priorities and are storing away cash they can easily access in response to economic uncertainty,” said David Gunn, president of Edward Jones Canada.

The reluctance to tie up their money in RRSPs reflects findings in an earlier study by Edward Jones this past summer, that showed one in three of Canadians planning to retire were thinking of delaying it because of the pandemic. The reasons were mostly financial: people were concerned about the need for more income, loss of investment value and uncertainty about how much they would need in retirement.

Another study out today found that almost one in three working Canadians believe they are in worse financial shape than before the pandemic.

In January, the Morneau Shepell Financial Wellbeing Index slipped to -2.8 points, (a negative score means worse than before 2020).

Since the pandemic began almost twice as many Canadians (27%) say their financial situation is worse than those (15%) who say they are doing better. Twenty-one per cent say their financial worries have increased over the past three months.

The study finds financial well-being is lower in all Canadian provinces, with Alberta scoring the lowest at -6.2. Quebec and Saskatchewan did the best at -0.9 and -1.5 points, respectively. Ontario and British Columbia followed at -2.4. Manitoba scored -3.4, Newfoundland and Labrador -3.9, and The Maritimes -4.9.

Why is this when apparently we are saving so much? Morneau Shepell says the limitations on spending that lockdowns have enforced may make the savings “circumstantial and, as such, very fragile.”

Even more worrying, one in five Canadians said their financial situation was impacting their work productivity, with younger people struggling more.

Among employed Canadians, 30% of respondents under 40 said they were supplementing their income by working in the gig economy.

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a man and a cat looking at the camera  

‘I’M NOT A CAT’ Anyone who has been caught on a business Zoom call in their pyjamas or suffering a bad hair day, has nothing on this poor guy. The video clip of a Texas lawyer stuck in a cat filter during a Zoom court hearing swept the Internet this week in a viral storm of hilarity. Apparently attorney Rod Ponton was using his legal assistant’s computer for the call and her daughter may have put the filter on earlier. As Ponton and his assistant struggled to remove it, the lawyer’s mortification was clear, saying at one point: “I’m prepared to go forward with it — if that’s — I’m here live. I’m not a cat.” Watch it here

a drawing of a face © Provided by Financial Post
  • International Energy Agency releases monthly oil market report
  • Francois-Philippe Champagne, minister of innovation, science and industry, will take part in a virtual event hosted by Sustainable Development Technology Canada
  • Mary Ng, minister of small business, export promotion and international trade, will participate virtually in the opening session of the TechNL Summit in Newfoundland and Labrador. Ng will participate in a fireside chat with Seamus O’Regan, minister of natural resources, on supporting Newfoundland and Labrador’s tech community and Canada’s innovation agenda.
  • Maryam Monsef, minister for women and gender equality and rural economic development, will make a virtual announcement to support women who have been disproportionally impacted by the pandemic
  • Conservative Leader Erin O’Toole will deliver remarks at a Greater Vancouver Board of Trade event
  • Kate Young, parliamentary secretary to the minister of economic development and official languages (FedDev Ontario), will make a virtual announcement in support of local rural businesses in Waterloo, Ont.
  • The Alberta Court of Queen’s Bench hears Ecojustice’s challenge to Alberta’s public inquiry into the alleged foreign funding of environmental groups
  • Federal Environment Minister Jonathan Wilkinson and Mines Minister Bruce Ralston make funding announcement on cleanup of dormant wells in B.C.
  • Today’s Data: U.S. initial jobless claims
  • Earnings: Restaurant Brands International, Brookfield Asset Management, RioCan REIT, Cineplex, Aurora Cannabis, Fairfax Financial, Agnico Eagle Mines, Yamana Gold, CI Financial, Bombardier, Walt Disney Co., PepsiCo, Molson Coors, Kraft Heinz
 

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In Canada’s hot housing market, Windsor, Ontario, burns brighter than most. Home prices here have soared 30% year over year and are on the brink of overtaking Calgary for the first time in more than 40 years, BMO chief economist Douglas Porter shows in the chart below. Four years ago, Calgary prices were double those of Windsor, highlighting that the hottest of the hot markets in the country are in Ontario and Quebec, said Porter.

chart, line chart, histogram © Provided by Financial Post

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a drawing of a cartoon character

Thirty-four per cent more Canadian businesses have pivoted online over the past year. So if you’ve been considering starting your own business or boosting your brand’s online presence, now is the time.

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Today’s Posthaste was written by  Pamela Heaven (@pamheaven), with files from The Canadian Press, Thomson Reuters and Bloomberg.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at posthaste@postmedia.com , or hit reply to send us a note.

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