A recent report from CIBC paints a grim picture of the savings habits of Canadians (According to Statistics Canada, the current personal savings rate of Canadians is -0.5%). There are many factors that may seem to explain the steep drop in the personal savings rate ranging from the “wealth-effect” of the strong housing market to low-interest rates. But the undeniable fact is that Canadians are simply spending all their disposable income.
The report also points out that the net worth of Canadians relative to personal disposable income has remained relatively stable, primarily due to increasing home prices. The seemingly good news masks the fact that the contribution of financial assets to passive savings has been declining. The report concludes that in a low return, low interest-rate environment, young Canadians must simply start early and save more compared to previous generations, but it is not happening.
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