Canadians have saved a record amount of money during the pandemic, resulting from the combined impact of reduced spending and collecting more money from government support programs.
In fact, Canadians amassed $212 billion last year, versus $18 billion in 2019, according to Statistics Canada. That works out to $5,574 per Canadian on average in 2020, compared to $479 in the previous year.
The average savings rate jumped from 1.3 per cent of disposable income in 2019, to 14.9 per cent in 2020. In April, May and June of 2020, the savings rate peaked at about 27 per cent.
As a result, credit card balances are down, fewer people are behind on payments and credit scores are up, according to credit rating agency Equifax Canada.
The situation varies greatly from household to household, as there continues to be a deep division between the financial situation of many Canadians. In short, if you were able to keep your job and stay healthy, you were likely to see your finances improve during the pandemic.
“It was easy to save. It was not very forced. I can’t go get my nails done, get my hair done, going to the pubs a lot less,” said Karen Jacobs, who also purchased her first house, with her husband, in February.
They are now renovating the home from top to bottom after saving nearly $1,000 a month during the pandemic, including through lower phone and insurance bills.
The record level of money saved is not the only reason behind Canada’s rising home prices, but it could provide a significant level of economic stimulus across the country.
As restrictions are eased, many Canadians have cash to burn.
“For a year-and-a-half, it feels like we’ve been locked down, so I feel like there is going to be quite a rush to go do anything,” said Lachlin Muir, general manager of Distilled Beauty Bar in Calgary.
The shop’s online booking system crashed earlier this month as customers tried desperately to book hair and nail appointments following the loosening of restrictions in Alberta.
Many businesses affected by the pandemic are hopeful that pent up demand and customers’ heap of savings will now translate into a blockbuster summer.
The high level of money saved by Canadians could provide a major jolt to the economy and ultimately replace the need for extended government assistance programs, many of which began during the pandemic.
Overall, Canadians have saved about $230 billion throughout the course of the pandemic, said Charles St-Arnaud, chief economist at Alberta Central, the central banking facility for the province’s credit unions.
Some of that money has been invested and used to pay down debt. Still, he estimates, about $150 billion is sitting in bank accounts and could be accessed with the swipe of a bank card.
“In the aftermath of the pandemic, we can expect households to make more savings than they have done in the past, but the vast majority will be spent,” he said.
However, we continue to see a sharp divide between the financial situation of many people. People who keep their jobs and are in good health are likely to see their finances improve during the pandemic.
Lower-paid workers, as well as those with less education, have generally struggled the most financially during the pandemic, as they were most likely to lose their jobs or face reduced hours, he said.
But if consumers become more confident in their spending as lockdown measures are eased, St-Arnaud said the boost in business for the hotel, restaurant, tourism and other affected sectors could help those workers most negatively impacted during the pandemic.
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