Household Savings Data Shows Only Canada’s Top Earners Are Thriving

Canada’s household savings rate soared, as generous benefits met few places to spend. At least, that was the narrative. Statistics Canada (Stat Can) data shows most households saved very little in 2020. The top two-fifths of incomes are responsible for Canada’s elevated savings rate. The bottom two-fifths of households didn’t save anything at all, but were net-borrowers. They had to accumulate debt to live, despite the supposed pandemic income boom.

Canada’s Low Income Households Had A Savings Rate of -60%

The lowest quintile of households, or the bottom fifth, didn’t save — they accumulated debt. These households had a net savings rate of -61.4% (-$60.35 billion) in 2020. It’s a big improvement from the -114% (-$90.14 billion) in 2019, but they still didn’t save anything. Rising government transfers, which were double the size of income lost, only helped to offset some of the debt.

Canadian Household Savings Rate

The percent of income Canadian households saved, by income quintile.

Source: Stat Can; Better Dwelling.

The Household Quintile With The Second Lowest Income Didn’t Save, They Borrowed

The second-lowest quintile of household incomes almost saved something, but didn’t quite. These households showed a net savings rate of -3.7% (-$6.88 billion) in 2020. This means they spent 3.7% more than they made that year. Compared to the -28.0% (-$45.02 billion) reported a year before, it might feel like things are booming. However, the country would need to be in perpetual lockdown for this to last. Otherwise, this demographic is likely to fall back to pre-pandemic levels of savings.

Canada’s Middle-Class Saved For The First Time In Years

The true middle class, the third quintile of income from the top or bottom, showed some gains. Their household savings rate reached 9.1% ($22.97 billion) in 2020, up from -6.9% (-$15.63 billion) the previous year. It’s a move from net-borrowing to net-saving, which is a good sign. However, this demographic has over 20 years of net-debt accumulation to deal with. If the bump is transitory, as a result of temporary transfers, it would fall back into negative territory soon.

Canadian Household Savings In Dollars

The aggregate dollar amount of income Canadian households saved, by income quintile.

Source: Stat Can; Better Dwelling.

Canada’s Second Wealthiest Quintile of Households Saved Nearly 1 In 5 Dollars

The second-highest household income quintile, the top 60-80% of incomes, doubled their savings. These households had a savings rate of 19.6% ($66.06 billion) in 2020, up from 9.9% ($31.50 billion) the year before. The rate in 2019 was unusually elevated though, rising to the highest level since 2014. Households in this demographic represent about 31.7% of all household savings. 

Canada’s Wealthiest Households Saved A Third of Their Income

Canada’s highest earning quintile saved a third of their income. They managed to sock away 33.1% ($186.61 billion) in savings over 2020. It’s a huge increase over the 25.7% ($137.38 billion) saved in 2019, but most probably didn’t realize they saved that much. One in four dollars earned by these households was savings before the pandemic. During the pandemic, these households represented 89.54% of all savings.

Yes, this combined with the second-highest quintile, is more than 100% of savings. That’s because they’re making up for the households that are accumulating debt instead.

Some evidence indicated the boost in savings was largely going to the wealthiest households. However, rising government transfers were thought to be providing some relief to low-income households. In reality, it only provided temporary relief from their surging cost of living. Once those transfers taper, as many have, three-fifths of households are likely to become net borrowers once again.  

The top two-fifths of households, with nearly all of the savings, would see a small impact. A reopening might lead to some spending, but at the same time, Canada is considering targeting them with transactional taxes. For example, Canada is considering a “luxury” tax, pitched as a revenue generator. There’s little evidence these populist taxes generate much revenue, but evidence shows they reduce consumption. This would turn money ready to be injected into the economy, into more cash sitting idle in bank accounts. Depending on how steep these taxes are, they may actually partially offset increased spending on reopening.

The takeaway? Canada’s high savings rate is mostly just the wealthiest saving a little more than usual. As for Canada’s poorest households, they’re still treading water. Even with Canada boasting about the lofty savings rate households have accumulated.

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  • RW 3 years ago

    Low income people aren’t thriving during a pandemic where the cost of goods have increased 20%? This is shocking. It should have been offset by lower interest paid on their million homes.

    • D 3 years ago

      “ These households had a net savings rate of -61.4% (-$60.35 billion) in 2020. It’s a big improvement from the -114% (-$90.14 billion) in 2019, but they still didn’t save anything.”

      It seems to me that they’re paying off their debt which is a good thing, it’s also deflationary and strengthens the dollars buying power. Unfortunately the government continues to devalue the currency relative to American dollars.

  • Vincent Fornelli 3 years ago

    The terminal notice from Statistics Canada said the gap between the rich and the poor is the smallest ever. I guess that isn’t the good news people think it is. LOL

    • Trader Jim 3 years ago

      They know the disposable income data is junk. I don’t know why they keep playing it up, since it very clearly was impacted by CERB replacing much more income than was lost.

      This isn’t a comment on whether CERB is a good or bad idea by the way. It’s strictly a comment on its impact on disposable income, which means it doesn’t mean the same benefits many assume have been created.

  • GTA Landlord 3 years ago

    So the rich will buy a second house, and that will be how sales continue? Or have we eliminated all low-income immigrants, and strictly adopted those with $230k+ incomes to move into the city?

    • D 3 years ago

      > $230k+ incomes

      How many Canadian households have that income? There’s nothing on it on statscan because they’re lazy and don’t want to work. Probably less than 5% country, around 10% in Toronto.

  • Igor 3 years ago

    Canada’s taxation policy never makes sense. It’s punitive. My household is now considered “high income” but won’t have a downpayment for a home for years. However I need to pay much more in income taxes to “help” people without a home.

    Meanwhile people with $3 million homes in Vancouver they bought for $100k 30 years ago are considered low income, and don’t even have to pay their property taxes.

    • SH 3 years ago

      Well, thank Millennials for not voting their interests. They have the demographic weight to change things, but haven’t yet done so. In BC, old people can legally evade property taxes. This outrageous policy could be abolished tomorrow if everyone under 40 said “Enough!” and aggressively voted for politicians of the same mindset.

    • Robert Michael Angus 3 years ago

      Not true. Igor seems to be confused about property tax deferral which is actually a HELOC. The taxes due become a first charge against title. i.e. ahead of any other mortgages and thus will be paid.

      • SH 3 years ago

        It’s a despicable, ageist policy that should be abolished. Can’t afford your property taxes? Then sell and move. You are not entitled to legalized tax evasion just because you’re old.

      • Kaliucla 3 years ago

        He’s likely referring to the Homer Owner Grant for Seniors and applying it in a situation where their mortgage is totally paid off. Though, the grant is limited – somewhat – to properties valued at $1.625mil.

    • Scott 3 years ago

      That’s because Canada (English Canada) is still a feudal economic system. The family compact is a live and thriving!

  • AtroubledCanadian 3 years ago

    All of these politicians are bought and paid for by the wealthy regardless of what ”party” they represent, which is why the legislation heavily favors the wealthy above everyone else. When times are good, the rich are winning, when times are bad, the rich are winning even harder.

    With the advent of modern technology and the accessibility of the internet, the question we should be asking every political leader is: why the hell should your party be allowed to accept donations – is that not a massive conflict of interest?

    • Derek Bowman 3 years ago

      This is a great comment. Someone needs to follow up on this.

    • D 3 years ago

      This. I’m not voting this election because nothing can be done about the oligarchy unless “extreme” measures are taken. Canada is a slave society, similar to Rome or Athens, if you’re not in the club than youre doomed. It’s similar every where else in the world but the oligarchy here is just as vicious and criminal as those in third world country and they don’t even have as much power and wealth as our oligarchy.

      • alex 3 years ago

        I wouldn’t say that. I tend to think Canada is has some of the lowest levels of wealth inequality amongst developed countries, especially along the extreme sides of the distribution. I would chalk the past 15 years up to a ton of vested interest in real estate, not only from banks, real estate associations, and the government, but from the people as well.

        I believe that narrative is changing though and we will likely see a paradigm shift in the up and coming decade as we’ve essentially hit a tipping point where we cant feasibly push real estate any higher unless we force massive levels of inflation, or instigate a debt crisis.

        If we don’t see a diversification of the economy, there will likely be a real estate crash, if we do see a diversification, we’ll likely see real estate slowly bleed out while other industries grow.

        • Paul 3 years ago

          I don’t mean to pick but we already are in a debt crisis. That is what has been fuelling the bubble.

      • DD 3 years ago

        Agree. Canada never had any revolutions to be free. It has monarchy of Canadian elite.
        Canadian parties like brainwashing new comers and Canadians about being first in the world in everything and anything.

      • AtroubledCanadian 3 years ago

        You should absolutely vote. If none of the parties satisfy you, you can cast a refused ballot.

        This sends a stronger message. If enough people do it, it will show a need for a new party with interests better aligned to its constituents.

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