Not saving enough
LIVING FROM PAY CHEQUE to pay cheque is a hard fact of life for many Barbadians.
Any failure to receive a weekly or monthly salary on time would plunge hundreds, if not thousands of Bajan households into turmoil and raise blood pressures across the country. According to experts, this is largely because families aren’t saving enough, have too much debt or are living beyond their means. That’s a complaint one hears frequently in Barbados these days.
“Barbadians need to save more for a rainy day, reduce their debt and leave out some of the feting on the hill,” a New York economist said recently.
“These are difficult financial times and the prospects for early improvement anytime soon aren’t too bright.”
But Bajans aren’t alone in saving too little and spending too much. A somewhat similar thing is happening in Canada and the United States. However, more and more people in North America seem to be heeding the warning against lavish spending and the importance of saving.
According to a national survey conducted across Canada, about 47 per cent of respondents acknowledged they are living from pay cheque to pay cheque and would be in dire financial straits if their wages were delayed for a week.
Here are some of the findings of the recent research.
• Seventy-three per cent of Canadian employees admit they have saved less than 25 per cent of what they were hoping to set aside for a rainy day.
• About 41 per cent indicated they now expect to work at least five years longer than they had planned back in 2007.
• Almost half of the 3 500 employees surveyed recently indicated they were putting away about five per cent of their pay to tide them over in an emergency. That’s less than half of what experts insist is required.
• Forty-five per cent of Canadians who are at least 50 years old and thinking about retirement acknowledged they have only accumulated 25 per cent of the savings they need to live relatively comfortably when their working days were over.
• Two-thirds of the people in the survey indicated they are changing their spending habits by saving more these days. That’s up from 40 per cent a year ago.
• The overall picture of financial security has improved in the past year as measured by those who would be in trouble if their wages or salaries were delayed. A year ago 57 per cent said that they would be in financial trouble but this year that number has fallen to 47 per cent.
“More Canadians are now able to save more,” said Caroline Bernard, vice-chairman of the Employees Association.
“However, only 13 per cent have saved half or more of their retirement funds goal.”
She described the improved sketch of financial security as “encouraging” but warned of serious challenges ahead for Canadians.
When the Bank of Montreal released its own rainy day report card last week, it too found that there was more optimism about the future as 66 per cent of those surveyed said they would be able to manage should a financial storm strike unexpectedly this year. A year ago, only 40 per cent of Canadians felt that way.
The Bank of Canada shares the concern about savings. It has warned households that far too many would be in trouble if a new and serious economic blow hit the country.
Part of the problem is the mountain of household debt in Canada, which has hit 152 per cent of disposable income
Like Canadians, the number of Americans relying on their next pay cheque to pay the bills has dropped but remains too high.
A recent study conducted by CareerBuilders showed that 40 per cent of workers are living pay check to pay check. That’s down from 46 per cent in the early days of the financial crisis that struck in 2008. Interestingly, only 23 per cent of workers never rely on their next weekly or monthly salary to get by.
“Making ends meet remains a challenge for millions of households, but the situation has improved for workers who have grown more confident with their job security or have taken steps to pay down debt and save more,” said Rosemary Haefer, vice-president of human resources at CareerBuilders.
“Seventy-two per cent of workers report they are more fiscally responsible since the end of the recession, and as the labour market continues to improve, we expect more workers will again be able to spend in ways that will drive the economy forward.
Any improvement in consumer confidence in Canada and the United States is good news for Barbados and its Caribbean neighbours who rely on tourism to drive their economies. North American markets hold the key to the flow of visitors to the Caribbean and to the willingness of Americans and Canadians to invest in the region.
Just the other day, payroll processor ADP reported that United States employers added 210 000 jobs in August and new claims for jobless benefits fell last month, dropping to its lowest level in a month. Job gains in July were revised upwards, reaching 173 000 from the previously reported 163 000.
In the absence of regular reports on consumer spending and saving in Barbados, there isn’t a reliable barometer to measure the financial well-being of Bajans and compare it to Americans’ and Canadians’.