It’s no secret that we’re not saving money at the same rate we used to. In fact, in the 80s (not that long ago!), Canadians used to save twice as much as Americans. Today, however, household savings rates in our country have fallen to only 4.2% of disposable income, compared to 5.5% among U.S. households. Let’s be honest, neither of those numbers are great, but that’s a significant drop in the past few decades.

Competition with our southern neighbours aside, this is cause for concern because a lack of savings can mean having to work longer and never be able to retire comfortably. You might not be aiming to retire at 35, but I’ll bet you don’t still want to be working at 70. If things continue as they are, we’d have to work for the rest of our lives!

What’s the deal?

Why have household savings rate been on the decline?

Higher Interest Rates

Although it’s easy to blame the ‘millennial attitude and lifestyle’, the reason for falling savings rates per household isn’t because we’re lazy. Older generations sure like to hassle us millennials for overspending and killing their beloved industries, but I don’t buy it.

Interest rates rose steeply from 0.5% in 2016 to 1.25% in 2018. This rise comes after nine years of ultra-low rates, an unprecedented stretch that also came in the aftermath of ultra-high interest rates in the ’80s. And while a higher interest rate may add incentive to put more savings in the bank, The Financial Post points out that this trend poses a unique problem for young people.

Debt becomes that much more costly when interest rates go up. And a lot of millennials are dealing with debt. Student loans, mortgages, or car loans, etc. are incredibly common today and those payments eat into your monthly budget, especially as rates rise.

The result? Our monthly incomes are getting devoured by debt repayment and not leaving much to set aside for future. Plus, we still have to pay for our avocado toast 😉

Rising Inflation

The increase in inflation also worsens the effect of interest rates. Having $10 in my wallet today won’t buy me the same things as it did ten years ago. Similarly, if inflation continues to raise prices, what I can buy with $10 tomorrow will be even less than what I can buy with that same amount today. Less purchasing power also takes away from money we could potentially be saving.

Lack of Financial Literacy

How many of you received any sort of financial education when you were in school? Not too many of you I’m guessing. It’s still shocking to me that we learn all these complex and impractical skills in school and nothing about personal finance. Not knowing how punitive credit card debt is, lack of knowledge about investment options, and a misconception that money is hard all work against our savings rate.

Newswire documents that 85% of Canadians know they need to save more but aren’t making it a priority. That’s a challenging mindset to change. As humans, we want the things we want, and instant gratification is, well, more gratifying than planning for the future. It’s vital though. I understand the desire to live well right now, but you need to balance that with your future. I’m pretty sure you’ll also want to be living well in thirty years.

How To Make Saving Easier
Image Credit: Newswire

How To Start Saving

We all have to start somewhere, and there’s no shame in being broke. But that doesn’t mean you don’t need to do something about it! Learning to live within your means, not making big purchases on credit, and understanding your budget are all steps anyone can take to set themselves on the right financial track. With enough discipline and a little creativity, higher interest rates and inflation shouldn’t stop you from having savings.

Your first step will be to figure out how much income you have and what your expenses are. Any excess can be put towards savings. Even if you think it’s a small amount, it’s always better to start small than to not start at all. If you don’t have any excess, then you need to look at either cutting your expenses or increasing your income. Maybe you can start a side hustle or limit the number of times you eat out each month?

Once you have the money to save, you need to figure out where to save it. In Canada, we have RRSP’s, TFSA’s and non-registered accounts. If you’re just getting started, a TFSA will likely be your best bet, but check out this post for detail on how to make that call.

Grow Your Money

If you’ve been reading my blog regularly, you’ll know that I don’t love the investment process. But the truth is; it’s essential. You need to grow your savings!

To do this, you can look at investments like GIC’s, stocks, bonds, mutual funds or ETF’s. You can combine any of those options to build a portfolio that matches up with your tolerance for risk. Any of these options can be held in the account types I discussed above and can be purchased through a financial advisor, your bank, or a roboadvisor. It really doesn’t have to be complicated or costly to start investing.

Those aren’t the only options though. You could also look to commodities like gold or silver to diversify your holdings and potentially lower your risk over the long term. FXCM notes that gold is not supported by any underlying economy, which means it’s not impacted by inflation.

Another option is to invest in real estate. This can be done directly by purchasing rental properties or indirectly by purchasing real estate investment trusts (REITs). You’ll have the ability to get in on real estate deals without actually buying an entire property yourself. It’s important to know what options are out there so you can make smart decisions when it comes to investing.


The household savings rate in Canada may be declining, but there are actions you can take to set yourself apart from the trend. Us millennials are working against high debt levels, rising inflation and increasing interest rates but we shouldn’t use those factors as excuses for delaying saving indefinitely. Live within your means, learn to invest your money, and avoid making purchases on credit. Follow that advice, and you’ll be able to save for the future while still enjoying today.

Finding saving money hard? You're not alone. Let's talk about the why and the how to fix that!

This post was proofread by Grammarly.

Photo by Shopify Partners from Burst


    • Sarah Reply

      I try to avoid the doom and gloom as much as possible! It’s so easy to get discouraged about money and think that small steps won’t make any difference but over time they really can.

  1. Your reasoning for the falling savings rates are spot on. I still don’t understand why financial education is not a more important part of education. This is great advice that more Canadians need to here. Thanks for sharing, Sarah!

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