Canadians must increase their average savings rate to close to 9 percent from the current 4 percent to meet their long-term financial goals, according to new research.
BMO Financial Group, Toronto, released this finding in The BMO Economics Report. The study follows a BMO Household Savings Report, which shows that Canadians plan to save on average $9,859 in 2013.
“The prospect of a prolonged period of subdued investment returns after the recent rebound suggests that Canadian personal savings trends, on average, are on the light side for adequate retirement purposes,” says Douglas Porter, Chief Economist, BMO Capital Markets. “While the most straightforward way for policymakers to address this over the longer term is to get interest rates back to neutral levels, the higher-interest-rate cavalry is nowhere on the horizon.”
Porter adds that, while debt has risen to 165 percent of disposable income, financial assets have rebounded to 453 percent of disposable income; this likely rose further in the fourth quarter, probably surpassing the record high of 454 percent in 2007, just before the financial crisis began.