Nearly half of Canadians would face financial crunch if paycheque delayed by even a week, survey shows
Twelve per cent believe they’ll never be debt free, while almost half say they’ll have to delay their retirement because they haven’t saved enough

NationalPost.com
Sept. 6, 2017
Jonathan Chevreau

Almost half (47 per cent) of Canadian employees say they’d be hard-pressed to meet their financial obligations if their paycheques were delayed by even a week, says a survey being released Wednesday.

The situation is slightly more dire in Ontario, where 49 per cent live paycheque to paycheque, says the ninth annual survey from the Canadian Payroll Association (CPA). Not surprisingly, these workers without a financial safety net say they spend all or more than their net pay, with the most common excuse for increased spending being “higher living costs.” If they save at all, the amount is well below the 10 per cent minimum savings level (of net after-tax pay) recommended by the CPA; 42 per cent of the survey respondents nationally said they save 5 per cent or less.

The lack of an emergency cushion is also apparent: 22 per cent nationally say they could not come up with $2,000 within a month to meet an unexpected emergency expense like a car repair. Little wonder that 35 per cent feel overwhelmed by their debt levels. Twelve per cent believe they’ll never be debt free while across Canada 42 per cent now believe it will take at least 10 years to pay down their debt (a figure that’s higher than the 36 per cent cited in the survey a year ago.)

The high cost of Canadian housing is also showing up in the survey. In previous years, credit-card debt was cited as the single hardest debt to pay off but the 2017 edition finds for the first time that home mortgages are the hardest to pay off: 32 per cent citing them versus just 23 per cent who cited credit cards.

Almost half (46 per cent) expect they’ll have to delay the timing of their retirement, compared to what they had hoped five years ago, with the main reason being “not saving enough.” Nationally, 74 per cent have saved just a quarter of what they feel they need to retire, and 47 per cent haven’t saved even that much. On average, half of working Canadians believe they’ll need a retirement nest egg of at least $1 million. The CPA says the average target retirement age is 61 nationally, and 62 in Ontario.

The survey numbers are worse for Millennials and Generation X: More than half of them would be in a jam missing a single paycheque (55 per cent for Millennials in their 30s; 51 per cent for GenXers in their 40s). And lest the reader conclude these patterns are based on low incomes, the CPA says there was actually a 5 per cent increase in the number of employees with total household incomes above $125,000 per year.

Ironically, the way out of this savings conundrum is to make an effort to save paycheque by paycheque: a strategy the CPA and other financial experts generally term “Pay Yourself First.” That means using your financial institution’s pre-authorized chequing arrangements (PACs) to automatically divert 10 per cent of net pay into savings the moment a paycheque hits your bank account. Just like income taxes taken off “at source,” the idea is that you won’t miss what you don’t actually receive.

Of course, consistent saving requires living within your means: spending less than you earn and banking the difference. For young people in particular, I’d suggest they start a PAC directed to tax-free savings accounts, which in time will automatically create a necessary cushion of emergency savings.