Savings Rate
Quick Definition
The percentage of income saved rather than spent, a key indicator of financial health.
Full Explanation
Your savings rate is the percentage of your gross or net income that you save or invest, rather than spend. Calculated as (total savings ÷ income) × 100. The 2023 Canadian household savings rate averaged approximately 6–7%, but many financial planning experts recommend saving 15–20% of gross income for retirement (including employer pension contributions). The FIRE (Financial Independence, Retire Early) movement advocates savings rates of 50–70%. A higher savings rate dramatically shortens the time to financial independence and retirement.
Related Terms
Budget
A financial plan that allocates income to expenses, savings, and debt repayment.
RRSP (Registered Retirement Savings Plan)
A tax-deferred savings account for retirement, with deductible contributions.
TFSA (Tax-Free Savings Account)
A flexible registered account where investment growth and withdrawals are completely tax-free.
Net Worth
The total value of your assets minus all your liabilities.
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