As many of you Canadians may or may not be aware, we are currently nearing yet another RRSP deadline with the 2014 RRSP deadline being March 3rd. However, as I reflect upon my own personal savings habits for the year and how little of my hard earned money I'm able to set aside for a rainy day or dare I say it, retirement (or so it seems). I couldn't help but wonder how other Canadians were fairing in this annual uphill battle to save our hard earned money for something that is, at least for myself, in the distant future. So in order to fulfil my own curiosity I dug up some numbers in an attempt to answer my own question.
Let's start with our top line, the amount of money we, as Canadians, make annually. The answer to that question, which may be surprising to some is roughly $48,000 for 2013. For simplicity sake, let assume we are talking about an average Canadian and not a household. Right off the top, the CRA takes 31% (the effective marginal tax rate can be close to 50% for someone earning in excess of six figures!), so we are left with $33,120. Take off $3,360 (roughly 7%) for CPP and EI contribution and we are left with net take home pay of roughly $30,000 per year.
Assume, this individual has just graduated, in his or her late 20s and lives in downtown Toronto and pays $1,200 a month in rent (assuming no roommate situation) so we are left with $15,600. Let's assume now that this individual lives simply and not an overly extravagant lifestyle, monthly costs would include: $50 cell phone, $50 Internet, $250 for food, $250 in entertainment, $200 other expenses. Therefore, after covering the bare essentials and living on your own this individual, making the average income has net savings of $6,000 per year.
Obviously, I may be over simplifying things a bit here for example if this individual lived with his or her parents and did not have to pay rent which would obviously materially increase this person's net savings. Conversely, if this person had to commute into work via Go Train or car which would obviously lower their net savings. However, if even in the most optimistic scenario an "average" Canadian is only able to save on aveage $500 a month why on Earth do we care that the maximum RRSP contribution room is $25,000 or $5,500 for TFSAs and dare not mention saving for a house?
This doesn't even take into account if this individual was married, had two kids and therefore, two mouths to feed and RESPs to worry about. How can we think about, as the big banks would like us to, "saving for our future" when the average Canadian can barely make ends meat? Just my humble opinion...
Let's start with our top line, the amount of money we, as Canadians, make annually. The answer to that question, which may be surprising to some is roughly $48,000 for 2013. For simplicity sake, let assume we are talking about an average Canadian and not a household. Right off the top, the CRA takes 31% (the effective marginal tax rate can be close to 50% for someone earning in excess of six figures!), so we are left with $33,120. Take off $3,360 (roughly 7%) for CPP and EI contribution and we are left with net take home pay of roughly $30,000 per year.
Assume, this individual has just graduated, in his or her late 20s and lives in downtown Toronto and pays $1,200 a month in rent (assuming no roommate situation) so we are left with $15,600. Let's assume now that this individual lives simply and not an overly extravagant lifestyle, monthly costs would include: $50 cell phone, $50 Internet, $250 for food, $250 in entertainment, $200 other expenses. Therefore, after covering the bare essentials and living on your own this individual, making the average income has net savings of $6,000 per year.
Obviously, I may be over simplifying things a bit here for example if this individual lived with his or her parents and did not have to pay rent which would obviously materially increase this person's net savings. Conversely, if this person had to commute into work via Go Train or car which would obviously lower their net savings. However, if even in the most optimistic scenario an "average" Canadian is only able to save on aveage $500 a month why on Earth do we care that the maximum RRSP contribution room is $25,000 or $5,500 for TFSAs and dare not mention saving for a house?
This doesn't even take into account if this individual was married, had two kids and therefore, two mouths to feed and RESPs to worry about. How can we think about, as the big banks would like us to, "saving for our future" when the average Canadian can barely make ends meat? Just my humble opinion...
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