What has COVID-19 done to personal finances in Canada?

Over the last week or two, I have been preparing a series of upcoming posts where I will walk you through a deep dive into the average Canadian household’s personal finances.

During my research, I stumbled upon an interesting tidbit that I figured warrant a short post.  The Canadian household savings rate in the second quarter of 2020 was the highest it has been in the history of available data from Statistics Canada (since 1961)!  28.2%!  During a pandemic!?  See the chart below:

What happened here?  From what I have read and can tell, although employee compensation dropped in 2020, generous government support programs such as Canada Emergency Response Benefit (CERB) likely exceeded income decrease.  At the same time, Canadians were forced to pare back their expenses as various restrictions (work from home, travel restrictions, businesses not being open) prevented people from spending what they normally would on transportation, travel, fast food, fine dining, etc.  Economic uncertainty also generally result in an increase in savings as people become more cautious and want to build some cushion to weather the uncertainty.  The opposite is true when the economy is booming – people are more comfortable with saving less and spending more.

Government transfer payments aside, I think this massive spike in savings during a global pandemic is a good illustration that Canadians do have the capacity to increase their savings above pre-pandemic levels – the average savings rate for the 5 years preceding the pandemic was a meager 3%.

More reading:

https://www.fraserinstitute.org/blogs/spike-in-household-savings-rate-only-temporary

https://www.fraserinstitute.org/blogs/spike-in-household-savings-rate-only-temporary

https://www.bnnbloomberg.ca/canadians-focused-on-savings-and-debt-not-spending-poll-1.1547281

Canada’s Household Savings Rate Plummets Lower After Government Supports Slow