PRESENT BIAS

Who needs tomorrow when we’ve got today?

Caving in to Temptation

With no fridges (and an abundance of caveman-chomping carnivores) our prehistoric ancestors had to live in the moment. We don’t. But our brains are still wired for “feel good now” behavior. That’s why it can be so tempting to spend everything now instead of saving for the future.

This is the latest in Franklin Templeton’s series, “Behavioural Finance for Everyday Investors”, where we describe common investment barriers – so you can overcome them.

Delaying gratification is challenging

The tendency to focus on the now can be seen in our national savings rate. As you can see below, Canadians aren’t saving us much as we used to.

NATIONAL SAVINGS RATE HAS DECLINED

Canadian personal savings rate, as a monthly percentage of disposable income (1)

Retirement savings are meager

A declining savings rate is bad news – especially for those who are approaching retirement.

Just look at the retirement savings of Canadians aged 55 to 64. As of the last census, only 13% of these households have more than $500k in their retirement portfolios. 68% have saved less than $50K.

More troubling: our recent survey of Canadian investors found that 19% of people who are less than a decade away from retirement haven’t saved a dime. (2)

RETIREMENT ASSETS – CANADIAN HOUSEHOLDS AGES 55-64 (3)



These charts are for illustrative purposes only and do not reflect the performance of any Franklin Templeton fund.

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Investor Behaviour

Main Topics

  • Present Bias

Additional Topics