By Sheryl Smolkin
Staying on budget can be a challenge at any time of year. But when souvenirs and snacks beckon on vacation or the hotel you booked ends up being much more than you expected, your bottom line may suffer an unexpected hit.
A recent BMO Report quantifies how Canadians’ savings are affected by summer spending habits. The study reports that as temperatures soar so does our spending, and while many don’t feel guilty about enjoying the season, half (52%) admit that their summer habits have negative long-term effects on their savings.
One quarter (28%) of Canadians say they go into debt during the summer due to their spending. Another 27% dip into their savings to support their spending and 13% forego saving and paying off debt altogether to enjoy the season.
Still, the BMO summer spending report, conducted by Pollara, reveals that Canadians are aware of their tendency to over-spend in summer and are taking steps to counter it:
- Compared to last year, fewer Canadians plan to increase their spending this summer (down to 32% from 45%);
- 25% of Canadians will hold off on travel, for budgetary reasons, this summer; and
- 15% feel they have too many other financial commitments to travel at all this summer.
Further, the BMO report found that 47% will restrict their travel to domestic trips to avoid fluctuating foreign exchange rates, or opt for a staycation (14 per cent), to get the most bang out of the Canadian buck.
“We’re noticing disparities across regions right now, with B.C. and Ontario continuing to drive Canadian consumer spending, thanks to strong demographic trends, low interest rates and favourable labour market conditions, “ says Robert Kavcic, Senior Economist, BMO Bank of Montreal “On the flip side, oil-producing provinces-Alberta, Saskatchewan and Newfoundland & Labrador-are seeing spending track below year-ago levels as those economies grapple with recession and the fallout from lower oil prices.”
Canadians and their Credit Cards
Almost half of Canadians (48%) admitted to paying off less of their credit card balance during the summer months than they normally would. For the 41% who carry a balance, which sits at an average of almost $3,000, enjoying the season can have longer term implications.
|Summer Spending at a Glance|
|Will use credit to pay for summer spending||28%||43%||34%||30%||27%||24%||26%|
|Find it difficult to get back on track after higher summer spending||35%||43%||29%||37%||40%||35%||35%|
|Will incur a small amount of debt as a result of summer spending||35%||51%||36%||29%||37%||39%||35%|
|Will pay off their credit card balance from summer spending ‘when they can’||56%||79%||45%||54%||68%||65%||59%|
Nick Mastromarco, Managing Director of Loyalty and Partnerships, BMO Bank of Montreal, encourages those who plan to use a credit card for summer spending to take advantage of credit card rewards programs that many cards offer to help offset their costs.
“While setting a budget is important year round, seasonal spikes in spending are common for Canadians, and those who gravitate towards reward programs when considering how to pay for purchases are wise to do so,” said Mr. Mastromarco. “Cash rewards, for example, can be used flexibly at any time, regardless if summer plans include travel. In essence, redeeming rewards can help smooth out any spikes in spending, enabling you to get the most out of the summer season.”