TORONTO, ONTARIO--(Marketwired - Sep 4, 2013) - According to the 3rd Annual BMO Rainy Day survey, 68 per cent of Canadians have had to rely on their rainy day fund to pay for an unexpected expense. However, the majority (58 per cent) did not have enough saved to cover the full cost of the emergency.
The survey, conducted by Pollara, also revealed:
- The majority (51 per cent) of Canadians have less than $10,000 in savings to cover unexpected expenses, including one in five (17 per cent) who have less than $1,000
- Fewer than half of those who have relied on their emergency savings for a major car or home repair could cover the entire cost (49 per cent and 47 per cent respectively)
- Only one-third (35 per cent) of those who were faced with job loss had sufficient savings to sustain them financially
- Having a lack of extra money available (57 per cent) was cited as the top reason for not putting more away for an emergency
According to BMO Economics, the personal savings rate in Canada has risen from historic lows of 1 per cent in 2005 to 5.5 per cent in the first quarter of 2013.
"It's encouraging that the savings rate in Canada is beginning to trend upward. However, many Canadians are still coming up short when faced with a financial emergency," said Christine Canning, Head of Everyday Banking Products, BMO Bank of Montreal. "Cutting back on non-essential spending - such as buying coffee or lunch at work - is one way to gather extra funds to contribute to your rainy day fund."
Ms. Canning added that even the smallest of contributions today can end up making a big difference when faced with an unexpected expense.
Rainy Day Fall Back Plan
Outside of cutting back on expenses, the study asked Canadians what their fall-back plan would be once they had exhausted their rainy day savings and found the following:
- Forty-one per cent would most likely sell assets - such as their car or jewellery - or turn to family and friends for support
- One-quarter (27 per cent) would leverage a line of credit and two-in-ten (18 per cent) would cash in their investments
The survey also revealed that Canadians are placing their emergency savings in a number of different places:
- Nearly half use a Tax-Free Savings Account (TFSA) (49 per cent), savings account (47 per cent) or other non-registered investments such as Guaranteed Investment Certificates (GICs), mutual funds, stocks and bonds (47 per cent)
- Approximately one-third use a chequing account (34 per cent) or high-interest savings account (30 per cent)
- Sixteen per cent keep their emergency savings in cash
"It's essential to have some type of emergency savings put aside for a rainy day, but where you keep it can make a significant difference," noted Ms. Canning.
Ms. Canning added that a typical emergency fund should be equal to three to six months of one's income and held in a savings or investment vehicle with easy access and a high level of principal stability. These include money market mutual funds, high interest savings accounts and TFSA's. For example, BMO offers the BMO Smart Saver Account, a high-interest savings account that allows for unlimited deposits and transfers into and out of the account.
The Pollara online survey was completed between July 26 and July 30, 2013, with a sample of 1,000 Canadians. A probability sample of this size would yield results accurate to ± 3.1 per cent, 19 times out of 20.
About BMO Financial Group
Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $549 billion as at July 31, 2013, and more than 46,000 employees, BMO Financial Group provides a broad range of personal and commercial banking, wealth management and investment banking products and solutions.
- Banking & Budgeting