Are You Having Trouble Saving Up for a Rainy Day Fund? You’re Not Alone!
In today’s financial landscape, many Canadians are starting out their adult lives already facing massive debts...and rising interest rate.
When it comes to the economic situation in Canada, many individuals worry about debt, inflation, interest rates, and the impact of all three factors on their finances. But while it is difficult to control what the government and economy do, people do have some choice regarding their approach to savings.
Only over one-quarter of people, however, currently have a “rainy day fund” according to a recent poll. Forty percent have only small savings that would last them up to one month. Nine years after steadily low interest rates, the Bank of Canada increased the interest rate three times in three months last year, when the poll was taken.
Recent Polls Show Millennials Are Struggling the Most With Debt
Most negatively impacted by interest hikes are likely the millennial group, individuals between the ages of 18 and 34, as only 10 percent have enough savings for one month of expenses, while 35 percent have none. Meanwhile, experts suggest people should have a minimum of three months of savings in the event that they need it, with which only 14 percent of survey respondents comply, and 13 percent have between six month and one year.
While 12 percent of individuals understandably believe increasing rates will have negative impacts, 17 percent are actually hopeful that there will be positive outcomes, such as greater investment returns. In addition, 38 percent believe there will be no change to their lifestyles or financial matters. It can help to gain a better understanding by consulting with a licensed insolvency trustee in Ottawa.
Those who have savings are naturally in the minority, including 15 percent who have a year’s worth or more—the majority of whom are over 55 years old and, therefore, close to or at retirement age. Sixty percent of young people and/or any individuals who are not considered to be wealthy worry to some degree about rate increases. If already owing money, debt help is available by speaking with a financial expert.
Having concerns is certainly disparaging based on age, as older people who have no mortgage on their homes or minimal payments left and have probably lived in the same home for a long time, bought for much less expensive than the current real estate market dictates. Often, those who are older are also wealthier, but both groups are less concerned about rising rates.
Causes for Concern for Canadians Facing a Growing Debt Ratio
Although credit card interest rates are already high, individuals should be concerned about non-fixed debt, such as lines of credit and variable mortgages on property. Home equity loans are particularly concerning. On the whole, Canadians are struggling to save because they are not earning enough money. They owe 67 cents on the dollar of their income whereas they were able to save approximately 10 cents for every dollar 30 years ago.
The impact of growing interest rates include less affordable mortgage payments, leading to greater default rates and consumer insolvency. Many individuals have dealt with the rising real estate prices by spending more than they can afford and taking out a larger mortgage, but low interest rates have made this more manageable and could very likely cease with the new rate increase.
A Licensed Insolvency Trustee in Ottawa like D. & A. MacLeod offers debt help with credit counselling such as teaching best practices for budgeting money and managing your financial health. If facing serious debt, speaking with a professional advisor can be particularly useful. Our financial experts work with individuals facing debt to help guide them through their difficulties and save for a rainy day.