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The Real Reason People Aren’t Saving for Retirement

The Real Reason People Aren’t Saving for Retirement

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It’s the holidays! Time to wade your way through the bustling crowds, frantically searching for last-minute gifts for your friends and loved ones. And time to pull out the plastic to pay for it all.

On average, Canadians planned to spend $766 on holiday gifts in 2015, according to Canadian Living, with 27% planning to spend more than $800.

In the U.S., people were feeling even more festive: a November Gallup poll found U.S. adults planned to spend $830 on Christmas gifts this year, up considerably from $720 a year ago.

All of this despite the fact that, in September, Statistics Canada reported a debt-to-income ratio for Canadians of 164.4%—the highest level ever reported.

At this point, you might be thinking, What a Grinch! It’s the holidays! So what if you loosen the purse strings a little? Trust me; I’m not immune to the spending frenzy: I recently shelled out $80 for a cookie jar. Why? Because it was two days before Christmas, and I had run out of time to shop, and I was getting desperate.

I don’t believe spending on Christmas—or any other holiday, for that matter—is the problem that prevents people from saving more. The real problem is credit: how easy it is to get it, and how bad people are at managing it.

I remember getting my first credit card at the tender age of 19, when I first arrived at Queen’s University. It was so easy! There was a booth right on campus, so I could sign up then and there. Plus, I got a free T-shirt!

I’ve been (reasonably) responsible with my credit cards since then, but that hasn’t stopped me from accruing debt at various stages of my life for various reasons—some valid, and some more frivolous. By no means am I trying to offload responsibility for those decisions.

But the fact is, credit is very easy to get these days…much more so than for previous generations. Every time I call my credit card company or my bank—even if it’s just for a simple question or a password reset—they offer me a line of credit or a limit increase. I politely decline, but expecting everyone to make that same choice is asking for trouble.

Of course, we need people to make money and spend money. That’s how our economy works. But people aren’t spending what they’re making—they’re spending a whole lot more than they’re making. And that’s a real barrier to saving for retirement.

How can employers help? Make sure employees have access to debt management counselling services—and know they have access. Although these services may be available through their employee assistance programs (EAPs), people often think of EAPs as a resource for crisis situations rather than for day-to-day issues.

Think about how to educate the next generation of employees on financial matters. We hear more and more often these days that spouses are being invited to participate in financial planning and education sessions. Why not invite employees’ children (those who are teenagers or young adults) to participate, too?

And if I had one (financially related) Christmas wish, it would be for credit card companies to show some Christmas spirit and stop recruiting on university campuses—or at least offer some sort of financial education to go along with it. Because with that kind of temptation, it’s just too easy to wind up on the Naughty list.