Canadians Are Saving A Lot More Than Americans—It’s Not Good News

Canadians are suddenly big savers while Americans are spending like drunken sailors on pay day. On the surface, that sounds like good news for Canada but it’s traditionally a sign of growing consumer hesitance, slowing the economy. At the same time, the resilient American consumer is leaning into further consumption, pushing their economy to defy expectations. Households in these two countries have essentially reversed roles since the pandemic, warns a major bank. 

Is Saving Money Good or Bad? It’s Complicated  

Generally speaking, saving money is a good thing—everyone should have some cash for a rainy day. However, a sudden shift in saving behavior signals that households are changing priorities. That provides us with an important signal for consumer sentiment.

Households spend when they feel opportunity is abundant, meaning they save less. A consumer is more likely to buy themselves a little something extra if they feel their job is secure. No need to save extra since the economy is so strong, they can find a new job if things go south. Since one person’s spending is another person’s income, this helps to further accelerate economic growth. 

Rising savings indicate spending reservations. Households are more likely to sock away extra cash if they’re worried about unexpected expenses, or a lack of income. As career prospects erode, so does spending. If one person’s spending is another person’s income, a lack of spending is someone else’s reduced income. This drags the economy, producing job losses, reducing income further, reducing spending… you get the picture. 

Canadian Households Are Saving A Lot More Post-Pandemic 

Canada’s households aren’t sold on the positive economic data that’s been trumping expectations. The household savings rate came in at 6.2% in Q4, climbing over the past year. A recent research note from BMO highlights this is a whopping 4 points higher than the average in 2019. Since this cash is pulled from spending, it understandably is contributing to slowing growth. That’s really emphasized when adjusting for the country’s population boom. 

American Households Are Spending A Lot More

In contrast, American households continue to demonstrate they haven’t bothered with doomsday calls. The latest data shows a savings rate of 3.8% in January, trimming 0.6 points over the 12-months following. BMO’s calculations show prior to the pandemic, households socked away 7% of their income. The extra spending is undoubtedly a major contributor to their continued economic boom.  

“The resilient U.S. consumer has been a big factor behind the surprisingly sturdy U.S. economic growth of the past year, but also for the global economy,” explains Douglas Porter, chief economist at BMO.

Adding, “It’s a very different picture in Canada, where the savings rate has moved higher over the past year and remains well above 2019 norms.

American & Canadian Households Have Reversed Roles Post-2020

The shift marks a departure from the post-Great Recession economy, where Canadians were faring better. 

“Effectively, the roles have reversed between U.S. and Canadian consumers-in the decade after the GFC and pre-COVID, Americans were much bigger savers than their Canadian counterparts, while the reverse is now true,” he says. 

His point fits textbook expectations. After the Great Recession, American consumers pulled back on spending as their country was hit with the worst recession ever. Canadian consumers were unscathed, leaving them feeling invincible and willing to take on more risk.  

“That’s a return to conditions seen from 1975-1995, when Canadians were the bigger savers,” according to Porter.  

A time period where the country experienced substantial growth, but also a lot of turbulence. It was a boom-bust economy, and not as stable as the comfortable growth many are accustomed to.



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  • Jay 2 months ago

    Canadians need to save more because of the high & escalating price of essentials.

  • Ross Cowan 2 months ago

    It’s interesting re Cdns. currently saving more than Americans because our Cdn. credit card increases are around 13-15%. So, one wonders what these increases are being used for? I suspect that some may be funding the burden of higher monthly mortgage payments in this stubbornly higher interest rate environment. Not a good sign given much higher interest rates on c.c. balances than on mortgages.
    Worth investigating further.

  • Tom 2 months ago

    American’s are spending and racking up debt, because they know that the dollar is not going to be worth anything soon and may probably make way for CBDC’s. Canadian’s need to save up for battery cars, that will need batteries replaced every few years, especially if they live in a place were a battery can’t handle 30 below zero.

  • Frank 2 months ago

    Good to see this column hasn’t gone the way of AI generated. Thanks

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