Are you wondering whether you should pay off debt or save during the pandemic? Well, you are not alone. Countless Canadians are asking themselves the same question.
The pandemic has undoubtedly changed our lives for the long term. With our movements restricted and the world of work so uncertain, its been a key moment to think about whether the extra money saved on commuting, socializing, or memberships should be saved, spent or used to pay off debt. Right now, and for the next few months for the very least, it’s time to pay off those debts.
In reality, Canadian savings have fallen well short of the recommended level of 10% of net income. According to Statistics Canada, Canada’s household saving rate fell to 14.60 per cent in the third quarter of 2020 from 28.20 per cent in the second quarter of 2020. Coupled with recent news reports about rising debt, the statistics paint a compelling view of the Canadian debt burden.
Saving during the pandemic
In a crisis, interests rates falling to record lows make debt cheaper to service. In other words, it is literally in your best interests to pay off as many debts as possible. Significantly for savers, low interest rates is a bad thing, meaning you have money sitting in an account that doesn’t make you much of anything.
If you have savings and debt, you could be losing money right now. Three or months savings is always encouraged to provide a buffer zone in case the unexpected happens, like losing a job, a fall in wages, or a medical diagnosis. But if you are debt-free, if the worst happens, you won’t have payments you cannot meet hanging over your head. For more information on saving, check out our tips on how to keep more money in your pockets.
Above all, speaking with a non-profit credit counsellor can make all the difference. If you are debt and need help getting started, contact us and we will connect you with one of our knowledgeable non-profit credit counsellors.