Last week, my cat was so sick that she needed to be rushed to the vet and put on intravenous. As it turns out, she had a viral infection. Her illness was so severe that it meant 4 trips to the vet over a 1-week span. If you know anything about vets, then you know that they certainly aren’t cheap. Some $600 later, my cat was sent home perfectly fine. I, however, was a little worse for wear and a little lighter in the pocket. Luckily, the cost wasn’t a huge financial burden, as I’d set aside money just in case something like this ever happened. Had it have been 5 years ago, though, I don’t know if I would have been able to say that. Financial preparedness got me through this one, but it got me thinking, how financially prepared am I really? And what happens if and when I’m not?
According to a CIBC poll, on average, 45 per cent of Canadians say their household has no money set aside for emergencies. An unexpected turn of events could send them scrambling, taking money from their RRSPs or taking on debt. When it comes to planning ahead financially, 60 per cent of Canadians aged 45-64 have money set aside for emergencies. However, today’s younger Canadians, aged 18-44, are woefully less prepared. Only 51 per cent have emergency savings of any kind. As a general rule of thumb, it’s recommended that you put away at least three months of income for emergencies.
The results of this poll got me thinking. If younger Canadians don’t have an emergency funds set aside, how prepared are they for retirement?
According to a BMO survey, they aren’t. Although nearly half of Canadians want to retire early, very few have even begun saving. Of those surveyed, 41 per cent of those aged 18-34 expect that they’ll stop working before they turn 60 years old. Some 57 per cent plan to retire by the time they turn 69. How realistic is it to expect to retire early when 27 per cent of those surveyed haven’t even started saving?
Of those who have put money away, 52 per cent have an RRSP. Some 37 per cent use a TSFA. Although the study revealed the types of accounts used, it did not divulge how much the respondents had saved.
Why Aren’t Younger Canadians Saving For Retirement?
Unfortunately, there hasn’t been a study done on why younger Canadians aren’t putting money away from retirement, but one could take a guess. Some might feel that retirement is too far in the future to worry about. Planning for retirement might not even be a priority to some, although surveys show that 82 per cent feel it is important.
Sometimes more important issues take precedence. Depending on what phase of life you’re in you might view post-secondary education, school debt, buying a home, dealing with a mortgage and family more important than planning for retirement. No matter what your priorities are at the time, know that planning for retirement is extremely important. And the more you pay now, the less you’ll have to pay later.
What About Pension Plans?
If you’re holding out for a better job with a pension plan, you may have tough luck – very few companies offer pension plans these days. And while it may seem like the most secure option, pension plans have their own issues. Take, for instance, recent stories in the news about massive shortfalls in pension funds. Some of Canada’s largest companies are in trouble, according to a piece in the Financial Post, and “lower returns mean companies must put aside more money for their pension funds to cover what they owe in the future.” While many of these companies are looking to the government for help, it’s not budging. The 6 companies currently at risk – dubbed the G6 – are Air Canada, Canadian Pacific Railway, Bell Canada, MTS Allstream, Canada Post and NAV Canada.
At the end of the day, there’s no substitution for wise planning and good, sound advice. Call a financial planner and ask a lot of questions. The more you know, the better off you’ll be. And start saving – today.