What's Your Savings Rate EditionHow has Covid-19 impacted your personal finances? For the past six months the focus has been on making sure income supports were in place for employees who lost their jobs and for businesses who were forced to shutdown or reduce their operating capacity. 

Outside of weekly trips to the grocery store, most of us sheltered in place for many weeks before the economy slowly opened back up across the country. That meant little to no spending on travel, dining, and entertainment – three of the hardest hit industries.

That resulted in Canadians stashing away $127 billion into their chequing and savings accounts in the first half of 2020. In other words, Statistics Canada reported the national savings rate jumped from 2-3% pre-pandemic to a whopping 28.2% from April through June.

That’s a seriously impressive savings rate, but one that has to be reconciled with unemployment still at 10.2% and more than 500,000 mortgage deferrals soon coming to an end. There’s clearly a disparity between those with the means to work from home and save, and those whose livelihoods have been turned upside down.

We are, thankfully, in the former group and have managed to keep a consistent income working from home. Our big savings were travel refunds from our trips to Italy and the U.K. But we put most of that into our backyard; pouring a concrete pad, buying a hot tub, and replacing our patio furniture.

I don’t keep a close eye on our savings rate but I was curious so I pulled up our budgets from the previous five years. Our savings rate has increased this year and we’re projected to save 36.5% of our income. The increase is mainly due to pausing our gym memberships, less restaurant spending, and less on entertainment and travel. It might have hit 40% if our wine budget didn’t increase 🙂

Our savings rate for the past five years:

  • 2020 – 36.5%
  • 2019 – 30.8%
  • 2018 – 31.7%
  • 2017 – 29.4%
  • 2016 – 26.6%

Has your savings rate changed during Covid-19? Let me know in the comments.

This Week(s) Recap:

I wrote a bit of a tongue in cheek post about whether I’ve already achieve F.I.R.E. (Financial Independence, Retire Early). To be clear, I’m definitely not retired. It just feels that way when you can work on what you want, when you want.

From the archives: 5 financial traps seniors fall into and how to avoid them

In case you missed this on Rewards Cards Canada, here’s a look at Air Canada’s reimagined Aeroplan program.

I got to see a sneak preview of a new investment product that will be launching this week. Without giving anything away, I’ll just say that you’ll definitely want to keep an eye out for my review on Wednesday.

Weekend Reading:

The credit card sign-up wars are starting to heat up so now’s the time to start looking for a new rewards card (or add a new one to your line-up). Our friends at Credit Card Genius have you covered with the best credit cards in Canada.

Jason Heath looks at the financial implications of buying a vacation property.

Nick Maggiulli looks at why poor people stay poor. The answer is complicated, but they are, in essence, stuck in a poverty trap.

An interesting take by Max Fawcett – Progressive parties have spent too long insisting that they won’t tax home equity. Here’s a thought: Maybe they should.

I loved this post from Morgan Housel, who explains why you should save like a pessimist and invest like an optimist:

“Be a little bit paranoid, knowing the assumptions you hold today could break tomorrow, and you’ll need enough room for error to make it to the next round.”

Morgan’s new book, The Psychology of Money, just launched last week. Here’s why he wrote it.

Here’s Nick Maggiulli again explaining what your psychology says about your relationship with money.

Related to my introduction on spending and saving during the pandemic, Preet Banerjee’s latest SPENT video shows how Americans spent their weekly $600 unemployment benefits:

The Irrelevant Investor Michael Batnick explains why money printing won’t cause inflation.

Speaking of inflation, Alexandra Macqueen wrote a guide to help you understand inflation, how it’s calculated, and what it means for your personal finances:

“The CPI is not without controversy, however, and one of the most disputed aspects is how the index treats the cost of shelter. 

The cost of housing prices is excluded from the CPI, although runaway housing costs have characterized the last decade in Canada’s major cities.”

The Michelle is Money Hungry blog shares an important conversation about time freedom.

Millionaire Teacher Andrew Hallam explains why the intelligence of an investment decision shouldn’t be judged based on stories, hopes, forecasts…or an isolated result.

A Wealth of Common Sense blogger Ben Carlson shares a key lesson on why even the best stocks have to crash.

Curious about the 4% safe withdrawal rule? See if you can pass this quiz on the Michael James on Money blog.

Travel expert Barry Choi shares a guest post on the My Own Advisor blog on whether travel hacking is worth it.

Another addition to the asset allocation ETF game. This time it’s TD, with what they call their One-Click portfolios.

Finally, check out this fascinating read on money – the true story of a made up thing.

Have a great weekend, everyone!

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12 Comments

  1. Brad S on September 12, 2020 at 5:20 pm

    Lost my job in March so my savings rate went to zero. But at some point it was usefully high as I had somewhere around 6 months of income saved. With CERB and some other more immediate funds it would only be this month that I need to touch that emergency money. Thankfully, I just started work last week. So, back to saving I guess. I’m looking at saving something like 20% of my take home.

    • Robb Engen on September 13, 2020 at 11:02 am

      Hi Brad, thanks for sharing and sorry to hear about the job loss in March. Great job having 6 months of income saved beforehand. Good to hear you’re back at work and saving 20% of your net pay.

  2. Maria @ Handful of Thoughts on September 12, 2020 at 5:35 pm

    Great saving rate Robb although I’m wondering what formula you prefer to use. When I went down the saving rate rabbit hole I realized that there are many ways to calculate it which can greatly alter the end number.

    I was never too big on calculating my saving rate because it felt like a vanity number sometimes. That being said one of my goals this year is to hit a 50% saving rate so I will be calculating it this year for sure.

    • Robb Engen on September 13, 2020 at 11:00 am

      Hi Maria, do you mean whether people use net or gross income, whether they include debt repayments in their formula, that sort of thing?

      I simply took our total amount saved into RRSPs, TFSAs, RESPs, plus my pension contributions when I was making them, and divided that total by our gross income.

      • Maria @ Handful of Thoughts on September 13, 2020 at 12:26 pm

        Interesting. I always use net income because taxes are inevitable. Not sure I understand why you would use gross income.

        • Robb Engen on September 13, 2020 at 4:40 pm

          Ahh, I guess that makes sense. It’s not a metric I’ve ever paid much attention to but since I track every penny with my zero-based budget it’s a great way to break out what percentage of income goes to taxes, savings, daily living, etc.

          • Pam on September 14, 2020 at 8:10 am

            I think I’d use net as I don’t really want to know the percentage I pay in tax. I am in a high bracket now so I do my best to ignore how much tax I pay (taking advantage of as many deductions as I can) and just do what my accountant tells me to do.

            I haven’t calculated my savings rate but maybe this year is a good year to start.



  3. Max on September 13, 2020 at 8:04 am

    How much was the increase in savings really just the delayed rent/mortgage that wasn’t paid ?

    WHY? Because you could… People were building their emergency funds…

    • Robb Engen on September 13, 2020 at 10:59 am

      Hard to say. I think of child care costs, which can be as high as $2k/month per child in areas like Toronto. One or both parents now working from home, day care and after-school care closed, that’s a lot of savings for young parents.

  4. max on September 13, 2020 at 11:26 am

    Absolutely… That is another very valid case !!! Lets see how many poeple restart their mortgage paymenbts and repay their rent… Savings in Daycare of course is yours to keep !!!

  5. Lou on September 13, 2020 at 4:54 pm

    Being a few years out from retirement, I’ve been maxing out on my RRSP, company puts in 12% and I match with another 6%.
    Also topping up my TFSA this year with another 18% and then switching over to top up the spouses.

    I agree with no vacations taken this year, it’s all going into savings, food and bills.
    I see no problems with putting away a total 36% this year. My contributions to my saving would be 24%.

  6. Amit on September 15, 2020 at 4:30 pm

    Hi Rob,
    I am a 33y chemical engineer in Calgary. I am an avid fan of your blog. Up until today, I never considered documenting my savings rate. I used net income for the same reason expressed by Maria. For the savings side, I used TFSA, RRSP, RESP, Investment Cash A/C, and mortgage lump sum payments. I did not include the regular P+I payments, though. The reason to include the mortgage lump sum is that it increases my net worth by reducing debt, so it serves the same purpose as savings.
    2019 – 55%
    2018 – 53%
    2017 – 38%
    2016 – 32%
    2015 – 38%
    The numbers are for the household. My wife is also a chemical engineer.

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