Sept. 10: How Debt Impacts Saving

September 10, 2026

How debt can handcuff your savings efforts

Canadians are buying an awful lot of stuff on credit these days – so paying down credit-related bills often leaves little to no room for much else, obviously including long-term savings.

Writing for Money.ca, Christy Bieber observes that “Canadian households now owe a record $1.80 in credit market debt for every dollar of after-tax income they earn, a ratio that has climbed for six straight quarters, according to Statistics Canada.”

Equifax Canada, she continues, notes that the average Canadian “is carrying a record $22,278 in non-mortgage debt.”

“Both trends point to the same underlying pressure: before groceries, rent or savings even enter the picture, more of Canadians’ paycheques are already spoken for,” she writes.

Her article asks the question – should we focus all our efforts on getting the debt paid down first, and then save later? Or is a blended approach a better idea?

While one would normally think of directing all available cash at the debt, Bieber continues, “there is a risk in funnelling every spare dollar toward debt and neglecting an emergency fund — a single surprise expense can restart the cycle, sending someone back to a credit card. That’s why it’s financially prudent to set some cash aside before going all in on payoff, as it creates an essential buffer.”

She cites U.S. financial author Dave Ramsey’s idea of “Baby Steps,” where you first set aside $1,000 for emergencies before getting aggressive on debt.

“The idea holds up well for the average Canadian. Setting aside even a small buffer in a Tax-Free Savings Account (TFSA), where withdrawals don’t create a permanent loss of contribution room, gives Canadians breathing room without derailing a debt-payoff plan,” she writes. And, she continues, if you can put a little bit into a retirement savings program to build up a nest egg – especially if there is an employer match – that’s a wise step.

The article outlines some other steps you can take to attack debt – after you first direct at least some money to savings:

• You could switch to a credit card that offers lower interest rate, which reduces your minimum monthly payment
• You could consider taking a loan to pay off your debt, as the loan interest rate is usually lower than the credit card interest rate
• Would a personal line of credit lower your interest rate versus a credit card?

An article produced by Global News suggests the rising cost of living may be a key reason why Canadians’ debt levels are so high.

Citing research from Equifax Canada, the broadcaster reports that “40 per cent of all respondents said they were spending more than a year ago, while just 18 per cent said they were spending less. Forty-two per cent of those spending more identified as being younger than 55, while 36 per cent were 55 or older.”

As well, the article continues, higher prices are causing a sort of “lifestyle shrinkflation” for Canadians.

An MNP survey found that “three in five Canadians (61 per cent) said at least half of their income is already committed to bills, debt payments and regular expenses before it arrives, while around one-third (32 per cent) said most of their paycheque is already committed before it arrives.”

That’s why so many are almost forced to use credit to make purchases, the article adds.

“A large portion of respondents to the Equifax survey say they are also using their savings, credit cards or other lines of credit to cover everyday expenses, with many piling up debt as they go,” Global News reports. “Nearly a quarter (23 per cent) say they are using savings to pay for day-to-day needs, while 20 per cent say they relied on credit more than last year. Thirteen per cent said they were borrowing money elsewhere to cover basic living expenses,” the article adds.

It’s a scary trend – having more debt than savings – that can create difficulty when you’re retired and living on a smaller income, notes Barron’s.

Research from Schroder’s, the article notes, found that “22 per cent of respondents who are 70 or older said their credit card debt exceeds their savings; 28 per cent of respondents between the ages of 60 and 69 said the same.”

Even if you can save a small percentage of your take-home pay, the compounding effect over time can make those loonies pile up.

The Saskatchewan Pension Plan is a voluntary defined contribution pension plan open to any Canadian with available registered retirement savings plan room. You can start small and ramp up later when things improve.

You decide what to contribute – it can be any amount up to your annual RRSP limit. You can also transfer in any amounts from other RRSPs you may have to consolidate your savings nest egg.

SPP takes your hard-saved dollars and invests them in our professionally managed, low-fee, diversified pooled funds. At retirement, your options include receiving a monthly annuity payment for life, or the more flexible Variable Benefit.

Check out SPP today!

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Barron's, Global news, Money.ca

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