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Recession Fuels Savings Spree Among Canadians; BMO's Dr. Sherry Cooper Discusses New Report

Toronto, February 26, 2009 – A new report from BMO Financial Group shows the current recession has pushed Canadians into saving more of their hard-earned dollars while supplementing their incomes through additional employment or second mortgages. The findings also indicate more Canadians intend to contribute to RRSPs this year.

The highlights from the BMO Savings Monitor survey, gauging the opinions of Canadians on the global financial crisis and its impact on their saving and investing strategies throughout the RRSP season, reveal:

Almost half, 48 per cent, have taken steps to improve their savings
Half of Canadians have created a household budget to help tame expenses
Two-thirds of Canadians will be making RRSP contributions this year, up from only half in 2008
In addition, 31 per cent have secured supplementary income through additional employment or a second mortgage while 25 per cent have cut back on big-ticket purchases

“What we're finding is that most people just aren't saving enough to meet their expected living standards for when they retire,” said Dr. Sherry Cooper, Chief Economist, BMO Financial Group, and author of The New Retirement: How It Will Change Our Future. “What I urge is that this is not the time to stop saving. I urge that people continue to save as much as they can, to max out their RRSPs, and to use the new tax-free savings accounts to the maximum possible.”

Despite the increased sums being stored away, the vast majority of Canadians still don't have a financial plan.

42 per cent mistakenly believe they don't have enough funds to warrant a financial plan

“With more money in Canadians' bank accounts, it's important they think long term with respect to how they are managing their money, regardless of whether it's a few thousand dollars or tens of thousands,” said Linda Knight, president and chief operating officer of BMO Mutual Funds. “It doesn't cost anything to stop into a BMO branch and speak with a financial advisor who can help make the most of their hard-earned dollars well into the future.”

Over the past few months, money management among Canadians has shifted.

Since December 2008, the percentage of Canadians who claim to be taking a more serious look at their money has grown from 20 per cent to 29 per cent.
In addition, the number of Canadians who are considering withdrawing from their RRSPs to supplement cash flow dropped from 15 per cent in January 2009 to only 10 per cent in February.
The number of Canadians who are considering cutting back on their RRSP contribution dropped from 31 per cent in January 2009 to only 20 per cent in February.

The common-sense approach to money management has also transferred to the way Canadians who will receive a 2008 tax refund intend to spend it.

51 per cent planning to spend refunds on sensible, long-term needs, including paying down credit cards (25 per cent); taking advantage of the recent home renovation tax credit (22 per cent) and investing in a TFSA or RRSP (20 per cent)
Only 12 per cent intend to use their tax refund to pamper themselves

The recession has also led to an inevitable shift in Canadian family concerns with more parents speaking to their kids about responsible spending.

41 per cent have begun reining in the amount of money they spend on their children

“Many of today's families are trying extremely hard to cope with the current recession through various means,” adds Knight. “It's not always easy to know what are the right moves to make with your money, which is why we are here to help make sense of money matters.”

The Leger Marketing online poll was conducted from February 5 to 9, 2009 and is based on a sample of 1,502 Canadians aged 18 and older. The margin of error for a sample of this size is /- 2.5%, 19 times out of 20.

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