On October 12, Finance Minister Jim Flaherty unveiled the Canadian government’s mid-year economic report card to a group of businessmen and women in Mississauga, Ontario. Flaherty’s announcement, contextualising the country’s biggest deficit in history, was coloured with an underlying uncertainty, prompting Flaherty to build a “risk margin” against any future unforeseen “rainy days”.

The 2009 deficit came in at $55.6 billion, $1.8 billion more than anticipated and about $13 billion more than the previous high in 1993-94.

These numbers are difficult for the average Canadian or business owner to comprehend in real terms. And we must caution to not oversimplify government lending and borrowing. In fact, Flaherty said “Canada is doing well compared to other advanced economies.”  Nevertheless, the minister’s speech is the perfect spring board for us to measure our individual fiscal health. There is no better time than the present to get our financial houses in order.

RBC Poll

The day after Flaherty’s announcement, the Royal Bank of Canada (RBC) released results of its RBC Savings poll on individual Canadians and their ability to save. The results of the poll indicate that many Canadians have not built a personal “risk margin” and are opening themselves to malignant consumer debt.

According to the RBC Savings poll, 38 per cent of Canadian are having difficulty meeting their savings goals either because they have nothing left over after paying bills (30 per cent) or because they are impulse spenders (eight per cent).

More than half of Canadians find it difficult to achieve their savings goals (57 per cent), be disciplined in their savings habits (55 per cent) or find it daunting to set up a program to ‘pay yourself first’ (51 per cent).

With more than a quarter reducing the amount they are saving (27 per cent) and a further one-in-five (19 per cent) indicating they have stopped saving altogether over the past two years, only a small minority (12 per cent) of Canadians have managed to increase their savings.

“Our clients tell us that one of the main challenges to saving is paying yourself first—being able to put aside money before it gets spent,” said Maria Contreras, product manager, Savings Accounts at RBC. “We advise our clients to start slowly by setting aside small amounts. Starting by setting up a separate, dedicated savings account and an automatic saving program with a small amount each week from your paycheque can go a long way in helping you reach your savings goals.”

When it comes to savings habits, approximately one-third (33 per cent) of Canadians diligently save by making regular contributions to a savings account, while a slightly smaller proportion (29 per cent) only save from time to time.

The most common reasons cited for saving money are to create an emergency fund (47 per cent), followed by vacation/travel (35 per cent), but priorities vary by age group. The RBC poll found that young adults aged 18 to 24 favour travel (47 per cent) as a reason to save, followed by saving for home purchase/renovation (36 per cent) or a car (26 per cent). Saving for a home purchase/renovation is equally high among those aged 25 to 34 (36 per cent).

“You can’t make wise saving decisions without taking a good, hard look at your budget—specifically, how much you earn versus how much you spend,” added Contreras. “Once you’ve tracked your monthly budget, it is important to thoroughly examine your spending habits in order to make informed decisions and to reach your savings goals.”

Ombudsman for Banking Services and Investments, Doug Melville, says “One of the advantages of better financial literacy is that it helps them handle the complexity of dealing with the financial services on offer in Canada.”

The savings survey was administered as part of Express Online, TNS national online omnibus survey. Fieldwork was conducted between August 12 and 16, 2010. In total, 1,121 completions were achieved.

About The RBC

Royal Bank of Canada (RY on TSX and NYSE) and its subsidiaries operate under the master brand name RBC. We are Canada’s largest bank as measured by assets and market capitalization, and among the largest banks in the world, based on market capitalization. We are one of North America’s leading diversified financial services companies, and provide personal and commercial banking, wealth management services, insurance, corporate and investment banking and transaction processing services on a global basis. We employ approximately 78,000 full- and part-time employees who serve close to 18 million personal, business, public sector and institutional clients through offices in Canada, the U.S. and 51 other countries.

For more information, please visit www.rbc.com.