Even six-figure households feel the strain as living costs erode savings, RBC finds
Close to 40 percent of Canadian households earning less than $100,000 have no emergency fund, leaving them exposed to a single unplanned bill.
According to a Royal Bank of Canada poll released July 16, the strain is not limited to lower earners.
Overall, 42 percent of Canadians fear one major unexpected expense could derail their finances and 32 percent have no emergency savings at all.
Among households earning more than $100,000, close to a third still feel one major expense away from trouble, and 75 percent said the rising cost of living is eroding their savings plans.
The high cost of living was the leading obstacle, cited by 76 percent of respondents as the main reason they cannot build or maintain emergency savings.
That share reached 86 percent in Alberta and 83 percent in Atlantic Canada.
Ryan Gubic, a certified financial planner and founder of Calgary-based MRG Wealth Management, told the Financial Post he was "not surprised, but… concerned" by the results.
Essentials and living costs in Canada have "risen faster than household budgets can deal with" over the past several years, Gubic said.
Statistics Canada reported that inflation rose 3.2 percent in May, with gasoline up 33 percent year over year.
Groceries, housing and fuel now consume a larger portion of household income, leaving less for savings, Gubic said, while the wave of mortgage renewals has added pressure on homeowners.
He expects the share of Canadians struggling to cover emergencies to keep climbing, and said the problem extends up the income ladder. “(These concerns) are not limited to lower-income households.”
Car repairs and other transportation costs topped the list of feared expenses at 39 percent, followed by major home repairs at 38 percent and medical or health costs at 31 percent.
Asked how they would handle an unexpected cost, 41 percent said they would draw on an emergency fund, 35 percent would turn to a credit card and 15 percent would borrow from family or friends.
One in five have never considered how they would cover such an expense.
About 68 percent of respondents said they do keep an emergency fund.
Among them, 49 percent contribute at least monthly, 34 percent add whatever is left at month’s end, and 27 percent have opened a dedicated savings account.
Half of all respondents said they regret not starting sooner, while 41 percent conceded they had underestimated how much to set aside.
RBC recommends holding enough to cover three to nine months of expenses, keeping the money in a separate, easily accessible account rather than in equities or a locked-in GIC, and automating contributions.
“We want to help Canadians build the habit of setting some money aside regularly, even a small amount, so that when expenses arise without warning, they have the financial breathing room to handle them,” said Erica Nielsen, group head of RBC Personal Banking.
RBC commissioned the online survey of 1,513 Canadian members of the Angus Reid Forum between April 22 and 28, conducting it in English and French.
