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Canadians built up a stash of savings during the early months of the pandemic which was expected to fuel spending and provide a cushion during the recovery, but despite rising wages, households are watching that savings stockpile be eroded by inflation. Average household net savings fell 44 per cent to $1,900 in the first quarter from the year before, according to Statistics Canada’s latest release of household economic accounts broken down by income and age. All income groups saw their net savings erode “as inflationary pressures weighed on consumption,” said the agency, noting lower income households have been hit hardest.

The good news, as far as spending continuing to fuel the recovery, is the average household still has more savings than they did before COVID-19 hit and governments ramped up income support programs. Statscan data show the average household still holds 63 per cent more in net savings than before the pandemic, even though that amount has shrunk by more than two-thirds since the second quarter of 2020.

But not all households are faring equally. As Statscan notes, wealthier households have a far better ability to absorb the shock of rising prices for goods and services than poorer households.

While average net savings among the top fifth of households saw the smallest year-over-year decline, at 15 per cent, net savings fell 95 per cent for the second-lowest income group. As for the poorest one-fifth, the average household in that group has negative net savings – meaning they spent more than their disposable income – and are further behind than they were before the pandemic.