Canadians are prioritizing saving—but stashing less cash

Saving rates for Canadians

Based on average savings rates, it's apparent that Canadians want to save.

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3 tips to maximize your savings

Higher living costs doesn’t make it easy — particularly when fighting outside factors, like greedflation — but there are still ways to pinch your pennies and boost your savings. To help, here are three tips to make the most of your emergency fund, retirement savings or nest egg.

Tip #1: Make your money work for you

Chequing accounts are great for a lot of things, but storing your savings isn’t one of them. Most chequing accounts pay a minuscule amount of interest — often as low as 0.01% — if anything at all.

To maximize your savings, it's better to put your money in a high-interest savings account (HISA), where it will have the chance to collect significant interest and grow over time.

A lot of the big banks have lowered the rates on their high-interest accounts since the pandemic hit, but if you shop around you can still find decent rates — sometimes exceptional rates.

For example, one of Canada’s highest-earning savings accounts will bring in up to 4.0% interest on every dollar you save. That’s 400 times better than a chequing account with a 0.01% annual percentage yield (APY).

If you put $9,000 — enough to cover six months of expenses, at $1,500 per month — into a high-interest account at 4.0%, you would earn $360 in interest in just one year. Over five years, those savings could grow to just under $10,950. Leave it in a regular chequing account at 0.01% and you’d earn a little more than $45.

Tip #2: Clear your debt without dumping your cash

If your emergency fund is all shored up and you want to tackle more financial goals, consider taking the opportunity to pay down debts.

Focus on debts with high interest rates, such as credit cards or payday loans.

There are a few great strategies that can help you pay down debt efficiently (and faster!), such as the snowball method or the avalanche method.

A good short-term option is to transfer your higher interest rate credit card balances to a low-interest credit card. Good options are credit cards offering balance transfer promotions or credit cards that offer permanently low interest rates.

Another option is to consider a personal debt consolidation loan. By using a new, lower interest loan to pay off all of your old, high-interest debts, you can save hundreds of dollars in interest, trim months off your debt repayment term and hang on to your savings in case you need them down the road.

A number of free services can match you with a debt consolidation loan in just a few minutes. Keep in mind, applying and getting approval for a loan takes time, so start the process but use other strategies in the interim.

Tip #3: Ease your way into investing

Perhaps the most effective way to maximize your savings is to develop and execute on an investment strategy. In almost all cases, your investment strategy should include a portfolio of equities — stock in publicly traded firms.

A great option to get started is to invest using an exchange-traded fund (ETF) — a basket of stock that offers cost-efficiences and diversification.

Look for trading platforms that offer new client promotions or brokerage accounts that charge investors no or low-cost trading fees. Good options include:

• Wealthsimple: Get $25 in commission free trades when you add $150 or more to a new trading account, plus pay no fees on ETF and stock trades
• Qtrade: Customers get free trades on hundreds of ETFs, while stock trade fees can be as low as $6.95 for elite account holders. Open a Qtrade account and new clients can earn up to $150 cashback.

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Getting into the habit of saving

While it’s hard to find a silver lining to the worldwide pandemic, one bright spot is that the lack of opportunities to spend money during the planet shut down meant Canadians had the opportunity to save.

According to Statistics Canada, total household savings were higher during the pandemic years than pre-pandemic years — approximately $350 billion more.

By late 2020, Canadians squirrelled away a staggering $90 billion, according to research from CIBC.

Sources

1. Statistics Canada: Household: Current and Capital Accounts (August 2024)

1. Statistics Canada: Household: Current and Capital Accounts (May 2024)

1. CIBC: The best investing habit to adopt (April 26, 2021)

— with files from Leslie Kennedy and Shane Murphy