By Ethan Currie, Staff Writer
Personal money management can be challenging to say the least. Despite many seeking professional help from a financial advisor, wealth accumulation and security is largely dependent on an individual’s saving philosophy, spending habits, or overall frugality tolerance.
The COVID-19 pandemic has had an incredibly negative effect on the global economy and has left a trail of financial damage to individuals all around the world as a result. Small businesses have had to close their doors, millions of Canadian and American workers have lost their jobs, and financial comfort increasingly seems like an unattainable objective for many of the younger generations.
As harsh as the pandemic’s economic impact has been, COVID-19 has served as a financial advisor of sorts; a catalyst for change in regard to how individuals manage their money. The pandemic continues to remind people about the importance of wise spending habits, as citizens recognize that steady income can be a truly uncertain concept at times. Emphasis on the generation of an emergency savings fund, frugal and minimalistic spending habits, and personal investing (in equities, or in other assets) has been widespread advice on social media throughout the roughly 20-month pandemic.
Fear of a repeated economic blow has many people cautious, and willing to change from a financial decision-making basis. So, what are Canadians saying in response to this?
According to a recent survey conducted by Scotiabank, 63% of Canadians do not plan to return to pre-COVID spending levels, and 53% plan to cut back even further on their spending. D’Arcy McDonald, a Senior Vice President at Scotiabank, stated that, “earlier this year we saw Canadians curb their spending, keep a closer watch on their finances, and refine some of their money habits because of the pandemic. Six months later, now with fewer restrictions, [and increased economic reopening], Canadians are keen on keeping up with the positive habits they developed.”
As per Mr. McDonald’s comments, it is unknown as to whether or not Canadians will stick to their new commitments of being more financially cautious. The pandemic’s economic implications, which parallel those of the 2008 financial crisis, may not be enough to ensure permanence in these improved monetary habits. Only time will tell.
A reduction in consumer spending, and increased savings as a result, will allow for Canadians to better account for financial risks, should an equivalent economic atrophy occur in the future. In a famous quote, chairman and CEO of Berkshire Hathaway, Warren Buffett, stated, “do not save what is left after spending, but spend what is left after saving,”. The root of financial security and success begins with how individuals budget their money in accordance with their income, and the pandemic has further solidified this concept.
Apart from reduced spending, increased saving, and increased prominence in personal money management strategy (i.e., in-depth budgeting), individuals are also seeking ways to grow their already existing wealth. For starters, the introduction of low-commission, self-directed stock brokerages, such as Wealthsimple, Robinhood, and Questrade, in conjunction with the frequent social media “stock talk”, has many Canadians and Americans looking to invest some of their savings. The streamlined process of e-commerce (via platforms such as Shopify) has also allowed for individuals to easily start their own online stores in search for an additional income stream. These habits are becoming increasingly popular, especially amongst the younger generations.
COVID-19 has provided many with a harsh economic lesson. Revealing the fragile nature of financial wellbeing, the pandemic has catalyzed change in personalized saving and investing habits. Eager in pursuit of a healthier, and wealthier future, many Canadians now intend on maintaining a well-structured plan for their finances. Whether it be cutting down on unnecessary spending, creating a more detailed budget, or investing a greater portion of income, there are many ways for Canadians to ensure their monetary success, and demonstrate financial resilience in response to the COVID-19 pandemic.