Canadians must increase their savings

The economic situation in Canada is far from rosy. With prices relentlessly on the rise, the cost of living outpacing salary increases, and the savings rate at generational lows, Canadians are facing a harsh reality: without increased savings, our ability to survive, let alone thrive, in a high-inflation environment may be at serious risk (https://www.creditcardsforbadcredit.ca/neo-financial-secured-credit-card-and-money-account/).

In a sustained period of low interest rates – which is typically seen in an inflationary environment – the government, banks and business have ample access to inexpensive credit, while and the average Canadian household doesn’t have those same resources.

An inflationary economy means that prices for staples, such as groceries and gas, are steadily rising, and wages are struggling to keep up. During this period Canadians have to face the harsh truth that they will face a real current salary loss, or stagnation.

Realistically, Canadians need to start setting aside more money than we did before. Whether it’s a few more cents (or dollars) in daily hard costs or larger things like items for rapid retirement (RRSP’s/ TFSA’s), Canadians need to make sure their savings pot is constantly and consistently growing. Even Certificate’s of Deposits (CDs) that require a few months deposit to access a slightly higher interest rate than a standard savings account could provide an attractive option to save more and reap the benefit of higher yields (https://www.creditcardsforbadcredit.ca/dividend-paying-stocks-in-canada/).

Living within one’s means is also a key factor in increasing savings. By avoiding high-interest debt such as consumer credit cards, more of one’s income can be saved. This allows for an increased opportunity for larger investments into longer-term financial opportunities such as income-producing rental properties or shares in the stock market.

In addition to debt avoidance Canadians shall more closely monitor and control spending. By limiting spending to absolute necessities only and cutting back on all the “luxuries” of life, Canadians will be able to sense which items are necessary and which ones are not. Also, creating budgets and savings goals and tracking them monthly, will help Canadians understand where their money is being invested and how it affects their overall financial health and savings (https://www.creditcardsforbadcredit.ca/).

Additionally, Canadians must plan their retirement savings strategy early.Too many people retire with insufficient funds, placing them on the pitfalls of being unable to live comfortably or even sustain their lifestyle during retirement. By investing in registered pensions and retirement accounts, Canadians can enjoy the benefits of compounding returns, thus creating greater potency for long-term growth.

On the other hand, the government also has an important role to play in this. Monetary policy has to be active and supportive of individuals seeking to save by passing measures such as lower taxes and ensuring that government transfers, such as CPP and OAS, better reflect current and future inflation, i.e, by indexing to inflation on an annual basis.

All in all, Canadians must take the initiative and take steps to increase their savings to survive the inflationary economy. With interest rates looking to remain dovish for an extended period of time, Canadians must take this on as a personal challenge to save more now to secure their financial wellbeing in the not-too-distant future.