Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Tuesday June 22, 2021
After a year of pandemic prudence, Canadians likely eager to spend the billions saved
If there is one silver lining to the COVID-19 pandemic for Grayham Havens, it was celebrating his two-year anniversary with his wife by purchasing a house last month.
All the government restrictions during the pandemic helped him drastically reduce his spending over the last year and begin socking away cash every month. After clearing leftover debt, the couple saved enough for a down payment.
Now, at the age of 40, Havens is a first-time home owner.
“We’re so fortunate, very fortunate, to get something like this,” he said about their grey bungalow in southeast Calgary, complete with a large deck, fire pit and pond in the backyard.
Havens isn’t alone. 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.
Havens and his wife were both able to collect Alberta’s critical worker benefit, as he was working in the grocery sector and she was involved in health care.
At the same time, their discretionary expenses — spending at places like restaurants and movie theatres — dropped sharply.
“We started saving thousands every month,” he said. “It started making me realize just how bad we were budgeting our own money in the first place. I mean, money was leaking left and right.”
Not everyone has extra money in the bank — but many do.
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 savings is not the only reason behind Canada’s rising home prices, but it could provide a significant level of economic stimulus across the country. (CBC)