Savings still an issue for many Canadians

A new survey released by the Canadian Payroll Association found that 47 per cent of Canadians would be in a bad financial situation if their pay was delayed by even a week. This number has improved significantly since last year’s 57 per cent, but still leaves a large portion of the population with less than desirable financial security.

Of the 3,500 employees surveyed, 66 per cent said they were trying to save more, a jump from 40 per cent in last year’s poll.

The survey also shows that Canadians are aware they may need to save more for retirement than they had previously thought. Just 34 per cent felt that savings of between $500,000 and $1 million would be sufficient for retirement, while 38 per cent felt they will need from $1 to $3 million.

While more Canadians are saving this year, they are not putting enough away. Almost half said they were saving just five per cent or less of their pay – half the recommended amount.

“This is particularly troubling when you realize that 71 per cent of the respondents are over the age of 35, with the bulk in their main savings years between 35 and 54,” wrote CPA chair Dianne Winsor.

Inadequate retirement savings

The results showed that 73 per cent of respondents have put away less than a quarter of what they hope to save – and of those 50 and older contemplating retirement, a full 45 per cent have only saved a quarter of their retirement goal.

Canadians are also expecting to work about five years longer than they had originally planned, the survey said.

There was also a noted difference between the East and West, with those on the West Coast and in the Prairies saving more than their Ontario and Atlantic counterparts.

Bank of Canada has been urging Canadians to save more in order to prevent a financial crisis should interest rates rise. The bank’s latest data shows household debt in Canada has jumped to a record 152 percent of disposable income in the first quarter of 2012, a worrying statistic.

CPA President and CEO Patrick Culhane shared some advice for those looking to save more: “Develop a savings plan, and then talk to your payroll professional about how you can administer it effectively through payroll.”

Payroll professionals are able to help employees split their net pay directly into a seperate savings account or RRSP.

The poll was conducted by Framework Partners market research firm from mid-June until mid-August of this year.

Sources: Canadian Payroll Association, Globe and Mail, CBC

Photo © Lamphear

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