Less to spend, more to save

It is something of a return to the good old days.

Forty years ago, the average Canadian put roughly 20 per cent of their monthly paycheque into savings. In Saskatchewan, it was even higher at about 25 per cent – the highest level in the country.

Over the years, though, that habit dissipated. We saved less and spent more on day-to-day consumption, increased our investment in the value of our homes and discovered lines of credit.

All of this eroded the savings habit in place of a spending habit. A quarter century after our savings rates peaked at 25 per cent, they fell to almost nothing. In some cases, it was a negative. That meant we were eating away at our net worth.

But then Covid-19 appeared and what is old is new again.

Economists at RBC Royal Bank recently issued a report that noted Canadians have found their old saving ways in response to the pandemic. The report says the Bank of Canada is forecasting savings levels of 28 per cent in the second quarter of this year. That beats the Americans, who are forecast to come in at 25 per cent.