Canadian’s fake-it-‘til-you-make-it financial approach doesn’t seem to be working out.
While 59 per cent of Canadians say they are dedicated to their savings plan, closer scrutiny shows otherwise with a third of Canadians regularly biting into their long-term savings for trips, cars or interior decorations, according to a survey by Tangerine bank.
“People want to sound like they know what they’re doing, like they’re money experts,” says Laurie Campbell, CEO Credit Canada Debt Solutions. “But the truth of the matter is, it’s the simple strategies to put money away that people are not following.”
The survey echoes Campbell’s sentiments with an unapologetic 50 per cent of Canadians saying they have no savings goal.
“I get very concerned because they don’t even have the basic savings in place such as an emergency fund or something for a rainy day should something happen to them,” she adds. “We recommend people have three to six months of their income for basic expenses in an emergency fund (and) make it a point to not include your credit in your savings strategy.”
While a quarter of Canadians manage to put aside over $500 a month, 56 per cent are saving less than $25 per week.
“For most of us, money is a limited resource (but) despite that, many don’t look at their finances strategically – they spend in the moment,” says Cynthia Kett, a chartered professional accountant and financial planner at Stewart and Kett. “They should be asking themselves, ‘How shall I prioritize spending of my scarce dollars?’”
Kett sees it as a sort of dissociation between long-term goals and the day-to-day reality, which can be headache inducing.
“The best thing to do is to break the big goals into smaller, more manageable parts,” says Kett. “Prioritizing their financial goals and allocating their disposable income accordingly will help.”
Translation – if you need to buy a coffee or eat lunch out once a week, build it into your budget.
“These should be conscious decisions, rather than impromptu ones,” adds Kett.
Setting up an automatic savings program where a chunk of your money is whisked into a side savings account before you see it, is a good way to stash aside some funds.
Kett also points to something called SMART criteria, a common tool for project management, to set goals that are Specific, Measurable, Attainable, Reasonable and Time-Based.
“Don’t be too restrictive – otherwise, short-term failures could derail the progress thus far,” she adds.