Less Risk And More Savings At Canadian Banks
Canadian banks may be the ones benefiting from the savings safety net many people have put their money into
. A growing trend has seen Canadians putting their money into checking and saving accounts rather than high-risk investments. Banks have reported a 20 percent increase in the last year, which is up considerably from the normal 3 or 5 percent they saw the year before.
Financial services consultant David McVay explains, "Canadians are more conservative than they were in 2007, adding that "more consumers are paying off debt, opening RRSPs and tax-free savings accounts than they were a year ago. We're seeing a shift from stock investing into keeping more money in savings accounts because of the financial crisis," he said.
"The banks are marketing to the uncertainty that Canadians have about their savings and retirement plans caused by the financial crisis," McVay said. This comes as banks see many baby boomers putting their money in safer places after declining stocks had a large impact on their retirement savings. Another equivalent loss could see them possibly working for another 10 years.
The recent 20 percent increase in the banks checking and saving accounts will add up to about $100 billion in business as banks can easily make more money from consumers with savings accounts instead of customers who pile their cash into stocks and bonds.
A recent Scotiabank survey done by Harris / Decima, found that almost one-third of Canadians do not have any savings accounts even though 94 percent of those surveyed said they feel better having a saving safety net. Gillian Riley, Scotiabank senior vice-president of retail deposits, payment and lending noted, "We did have a tough period in the last few years and I think now is a great time to really focus on this and get people thinking about how they can save. Over the last year we certainly have seen some movement towards savings as a flight to safety," Riley added.
It was also found that 55 percent of those surveyed said they do save money on a regular basis but yet, one-in-five Canadians confess they do not have any savings at all. It was also noted that the debt to income ratio has risen dramatically and is currently around the 147 percent mark. That means for every dollar a person makes, they owe $1.47. These numbers are proof that it's important to save more than we did before the recession. Being prepared for the future is always the safest bet.
by: Molly Wider
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