Canadians struggle to build emergency fund

If there is one trend from the past that deserves to be elevated to retro-chic status, it is saving. In an effort to foster a higher savings rate, Scotiabank is encouraging Canadians to start socking away what they can.

Scotia is encouraging its clients to employ an automatic savings plan, which is probably good advice for all Canadians trying to set aside extra cash. When considering how much to save, clients should try to stash away at least 10% of their take home pay.

The bank points out that there is no “one-size-fits-all answer” to the question of how large an emergency fund should be, but suggests a range of between three and six months worth of living expenses.

On a regional basis, Quebecers were the most likely (36%) to have set aside enough to cover at least three months worth of expenses, followed by British Columbians (34%), Prairie residents (33%) and Ontarians (32%). Atlantic Canadians were at the back of the pack, with just 27% hitting that savings threshold.

Quebecers also led the country in delaying retail gratification, with 57% saying they postponed a major purchase in 2009. Ontario ranked second (55%) followed by Atlantic Canadians (54%), British Columbians (53%) and Prairie residents (52%).

Atlantic Canadians were the most likely to save up for the purchase or wait until they could pay in full (34%), edging out Ontarians (33%). Quebecers and British Columbians were separated by a single point in this category, at 29% and 28%, respectively, while only 26% of Prairie residents said they would save up for the purchase or wait until they can pay in full.

In a separate survey on saving by Harris Decima, conducted on behalf of Thomas Cook, 69% of Canadians said they save up for travel expenses before their trip. More surprising though, is the finding that shows 66% say they return from a trip within the budget they set for themselves.

(07/30/10)