Canadians are losing net wealth and savings says StatsCan

Inequality is worsening too as the lowest income households see their situation decline by more than those with higher incomes

Canadians are losing net wealth and savings says StatsCan
Steve Randall

Canadians’ net wealth and net savings positions have weakened as expenditure and debt outpaced income and assets.

A new analysis of the distributions of household economic accounts by Statistics Canada for the third quarter of 2022 reveals that  that increases in the cost of living are having a negative impact on net saving and wealth, especially for lower-income and younger Canadians.

The bottom 40% of income earners saw their net worth decline by almost 11% year-over-year, while net saving was down 12% compared with the first quarter of 2020.

While those on lower incomes saw improvement in self-employment income (largely related to farming), this was more than offset by the end of pandemic-related benefits and rising borrowing costs.

Meanwhile, the disposable income of the top 20% of income earners was little changed year-over-year (0.9% decline) with self-employment income up nearly 19% and net investment income up almost 10%.

While the wealthier cohort’s wages and salaries were down 3% year-over-year, they were more than 17% higher than at the start of the pandemic.

Savings challenge

For lower-income Canadians, saving has become harder due to the cost of living.

The drop of 12% for the bottom 40% of earners compares to a gain of 34% for those in the second-highest quintile and the 21% for the highest.

Average household net worth was down 6% in the third quarter of 2022 compared to a year earlier and while the economic equality gap had been closing during the pandemic, it increased by 0.5% in this latest quarter of data relative to a year earlier.

Net worth for those with lower incomes was mainly impacted by rising debt while for wealthier cohorts debt was stable but they saw a decline in the value of their financial assets (-6.7%) and real estate (-3.3%).

Younger households

The impact of the cost-of-living crisis is keenly felt by younger Canadians with the net worth of under 35s down almost 10% while those aged 35-44 saw an 8% decline.

Younger Canadians are adding debt to pay for everyday expenses. The debt-to-income ratio for the youngest households reached 177.9% in the third quarter of 2022, up 3.3 percentage points from the third quarter of 2021.

For those aged 35-44, the debt-to-income ratio declined 1.2 percentage points to 238.7% and for those aged 45-54 years it declined 8 percentage points to 223.4%.