Savings squeeze hits Canadian millennials, with 55% citing too little income left over

TORONTO — A new financial report points to growing challenges for millennials in Canada in saving money and preparing for retirement. Many say they cannot set aside enough for the future because of higher living costs and monthly financial obligations.

The study found that 55% of participants consider a lack of disposable income after covering basic expenses the biggest obstacle to increasing their savings.

The report also found that about one in five people does not expect to be able to retire at all, reflecting concern about long-term financial security.

How much do Canadians save each year?

Haventree Bank carried out the study in co-operation with Angus Reid. It surveyed 1,000 Canadians aged 30 to 45.

The results showed that only 42% save or invest part of their money with every paycheque they receive.

By contrast, 66% contribute to savings or investments at least once a month, while 10% cannot save any amount.

The study found that 30% save less than $2,000 a year, while 16% put away between $5,000 and $9,999.

Those who manage to save $10,000 or more a year make up only 22%.

The results indicate that committing to save does not necessarily mean building up enough to cover future needs.

Cost of living and debt get in the way of saving

Participants named several reasons they cannot put away more money. The leading one, at 55%, was too little income left after paying expenses.

Debt came second at 16%, while 8% pointed to limited financial knowledge or confidence in making investment decisions.

In addition, 25% said their current priority is limited to covering day-to-day expenses, with no ability to make long-term financial plans.

The figures reflect the pressure that housing costs, bills and basic needs place on the budgets of Canadian households.

Women less able to save than men

The report revealed a clear gap between men and women in the ability to set aside part of their income for savings.

Some 48% of men said they save with every paycheque, compared with 38% of women.

Also, 25% of men can save $10,000 or more a year, compared with 19% of women.

On investing, 19% of women said they are currently unable to set aside any money, compared with 10% of men.

These gaps illustrate differences in financial capacity among participants, though the study does not establish a single cause for the disparity.

Alberta and British Columbia face retirement worries

The results showed that 63% of participants in Alberta save less than $5,000 a year.

Of the province's millennials, 24% said they do not believe they will be able to retire fully.

British Columbia recorded a similar share, at 23%, while only 46% of participants there expect to be financially ready for retirement by age 65.

Nationally, 18% do not expect to be able to retire.

Tax-free savings accounts top the list of choices

Despite the difficulties, the study showed clear interest in financial planning. Some 58% of participants keep most of their long-term savings in a TFSA or RRSP.

These accounts offer tax advantages that help Canadians save and invest under certain conditions.

In addition, 43% said they spread their money across several financial institutions rather than relying on a single bank.

Preparing for retirement and achieving financial independence remain among the main motivations for saving.

Retirement outlook worries millennials

The report found that only 26% expect to be financially ready for retirement before age 60, while 56% expect to reach that point by age 65.

The organization behind the study says the core problem is not a lack of awareness of the importance of saving, but the limited money available after monthly obligations are covered.

The findings come alongside another study, by Willful, which showed that 40% of Canadians feel their financial situation has become worse compared with last year.

The figures highlight the challenges facing a generation trying to build its savings and secure its retirement amid rising expenses and uncertainty about the economic future.