If you suffer from a job loss or there is a financial downturn, are you able to survive for three months on your savings? Although many are prepared compared to a year ago, a significant number of Canadians would not be ready to weather a slump.
The Bank of Montreal published the results of its second annual Rainy Day Survey. The figures, according to financial analysts, are an improvement from last year, but many Canadians are still not meeting their monetary needs.
Canadians were asked how prepared they felt if they lost their job, the economy took a sudden downturn, a financial emergency took place or a life-changing situation took place. The study found that two-thirds of respondents were ready for challenging times. This number is up by more than a quarter from 40 percent in 2011.
Other important findings were that more than half (54 percent) of Canadians have more than three months worth of savings, while nearly half (49 percent) say they have access to about $5,000.
A statistic that has much of the financial community worried is that one-third (32 percent) responded that they felt unprepared to weather an economic calamity and 19 percent said they would deplete their savings in less than a month.
When looking at respondents in different provinces, the survey found that the most prepared were residents in Alberta (79 percent), Atlantic Canada (74 percent) and Ontario (72 percent). The least prepared were those in Quebec (44 percent).
“Being prepared for fluctuations in income or unexpected expenses requires an ongoing assessment of expenses and other spending habits," said Su McVey, Vice President, BMO Bank of Montreal, in a press release. "The general rule of thumb is to have an emergency fund set aside that is equal to three to six months of your income in a high-interest savings account.”
At the present time, the personal savings rate is 2.9 percent, which is at historic lows compared to the 20 percent rate during the early 1980s and seven percent at the height of the recession in 2008/2009.
Digital Journal reported last month of a similar poll conducted that suggested 45 percent of Canadians did not have any emergency savings.