Household spending is going up in Canada – but it’s not being fueled by borrowing. Instead, Canadian families are dipping into their savings to fund their lifestyles.
Those findings appears in a recent report from CIBC that examined what was the driving force behind a 4.2% increase in household spending in the first quarter of 2014. Avery Shenfield, Chief Economist at CIBC, explains –
“Though Q1 wasn’t a barn burner, nominal household spending was still up by 4.2 per cent, year-on-year,” says Shenfield. “It wasn’t borrowing, but until recently, elevated confidence and its impact on savings, that provided the fuel.”
The CIBC report indicated that Canadian savings rates had dropped a few points to 5 per cent over the last year. This was counteracted by climbing home prices which contributed to increases in personal net worth.
Jeff Schwartz, executive director at Consolidated Credit Counseling Services of Canada, says this is cause for concern –
“A lot of Canadians are house rich, but money poor,” says Schwartz. “Due to the fact we’ve seen home prices fall before, I advise Canadians to keep saving and not rely on home equity for their future financial plans.”
However, Schwartz pointed out there were some things he found encouraging in the CIBC report –
“Overall, outstanding credit card balances and lines of credit seem to have stabilized over the past few quarters,” points out Schwartz. “I hope this is a sign that Canadians are choosing to avoid taking on debt and spending more than they can afford.”
Consolidated Credit has compiled the following tips for Canadians as they plan for the future –
- Get out of debt – Building wealth begins with getting rid of debt. Using money for paying off debts is a wise choice that will pay off in the long run. If keeping track of debts and meeting payment deadlines is a hassle, utilizing automatic deductions and payments from your bank account can be a smart way to help you on your journey to living debt free.
- Learn how to save money – Saving for the future is a smart and effective way to ensure a stable financial future. Saving can take place regardless of what you buy. On a small scale, looking for deals and coupons to reduce your grocery bill can save hundreds of dollars a year. On a larger scale, selling your second car will result in thousands of dollars of savings when you factor in gas, insurance, maintenance and depreciation.
- Face the facts – Examining your finances is the first step towards learning how to budget. Take stock of every dollar coming in and every dollar going out. Use these figures as a basis for your spending and saving plan each month. Keep track of what you buy and how much you spend and make sure you stay within your goals. For more detail and tips on how to budget, check out Consolidated Credit’s budgeting tools.
If you want to learn more about making responsible financial decisions, check out Consolidated Credit’s free Personal Finance educational section. If you’re struggling with debt, call one of our trained counsellors today at 1-888-294-3130 for a free debt analysis.