Saving makes cents - MoneySense

Saving makes cents

Saving is a lost art. You’d think that with all the yada-yada about how important it is to save, what a big deal RRSPs and TFSAs are, and the scant resources we’ll have if we count on the government, that we’d all be squirreling away money for the future at a wicked clip. We’re not.


When David Chilton wrote The Wealthy Barber in 1989, millions of North Americans bought it. The messages were clear and simple. The strongest: “Save 10%.” We all nodded and sighed. Yes, indeed, we should be saving. And once upon a time, we did.

Canadians had the reputation of being good savers. Between 1973 and 1993 we saved 10% or more, with our savings rate reaching a peak of 18.5% in 1982. In 1993, four years after Chilton started preaching about how important it is to “pay yourself first,” we began our great slide. By 1999, we’d hit an all-time low of 3.6%. But we weren’t done slipping yet. In 2003, the average Canadian saved just 1.4% of his or her pay. And in April of 2007, the personal savings rate came in at NEGATIVE 1.3%.


That’s the big question. Why would we just stop saving? What happened to make us think that we didn’t have to put away some money for the future?

In Boom, Bust and Echo, David Foot asserted that, “When you are young, you are a borrower. In your 40s and 50s, you are trying to build a nest egg for retirement.” Yet since 1993, as we watched the first of the baby boomers turn the corner to middle age, the savings rate plummeted despite a healthy economy, low inflation and more being written about the importance of saving. Today, there are more people going into retirement with debt than ever before.

Okay, so what we know we should do and what we actually do are totally different things. Whether you want to blame higher taxes, easy consumer credit, a booming housing market or job losses, the reality is that we are not saving what we should. The savings stats are a little like riding a roller coaster these days. According to the Stats Man, by the third quarter of 2009, our personal savings rate had risen to 4.8%. Yipee! By the first quarter of 2010, it had fallen back to 2.8% Awww! This is substantially lower than the 6.2% Americans were saving in the first quarter of 2010. Perhaps we, too, need the stuffing kicked out of us to get back into the savings game.