Here's what you can do with your extra savings during the pandemic

Personal finance journalist Rubina Ahmed-Haq says Canadians should use this opportunity to pay down debts, invest and start an emergency fund.

Statistics Canada says household savings rate hit 27.5% in 2nd quarter of 2020

Saving money on transportation and going out has helped many Canadians put more money into their savings, says financial expert. (Getty Images)

Many Canadians have been spending more time at home since the start of the COVID-19 pandemic and that's helped them curb their spending and put more money than ever into their savings.

According to Statistics Canada, the household savings rate hit an all-time high at 27.5 per cent in the second quarter of 2020, before easing to 14.6 per cent in the third quarter. Economists estimates it will be around 13 per cent in the fourth quarter as the pandemic continued into 2021. 

In 2019, the average savings rate was 1.4 per cent.

Personal finance journalist Rubina Ahmed-Haq says Canadians should use this opportunity to pay down debts, invest and start an emergency fund.

Finance journalist Rubina Ahmed-Haq says Canadians should use some of their extra savings to start an emergency fund. (Courtesy of PC Financial)

Here is part of Ahmed-Haq's conversation with Canada Tonight host Ginella Massa on how Canadians can take advantage of their extra money.

What advice can you give to Canadians who are interested in getting into investing?

It's never a bad time to invest, Haq said, but she recommends people avoid day trading and look into long-term investments as the markets right now are very volatile.

"The market news right now should be seen as entertainment. You should still be making the same kinds of decisions that you would make a year ago [or] two years ago," Haq said.

She recommends Canadians invest in companies that have a good history of growth but still have lots of potential and pay a dividend.

What advice can you give to people interested in investing in cryptocurrency?

Haq says it's a volatile market and people should be prepared to watch their investment fluctuate. 

Bitcoin, for example, has had a history of reaching new heights followed by dramatic falls in value, she said. 

How can Canadians take advantage of the extra money they've saved?

For Canadians who have a lot of debt, Haq recommends paying down their high interest debts and making lump sum payments to their mortgages in order to "service your debt much more easily."

If you've taken care of all that, then she said the next best step is to start an emergency fund.

"When the pandemic was declared, those people who had some cash on the side that they could tap in the case of an emergency, they just felt much more comfortable," she said. 

It's been a weird year with the pandemic, how can Canadians prepare for tax season?

The most important number to know, according to Haq, is how much you made in total income in 2020 — including money from employment insurance or the Canada emergency response benefit.

She recommends using a "simple income tax calculator" to find out how much income tax and other taxes you will owe and compare that to the information you've given to the Canadian Revenue Agency (CRA).

"And if you feel that you are going to have a tax bill, you could make an RRSP (registered retired savings plan) contribution before the deadline ... to reduce your overall income tax bill to (the) Canada Revenue Agency," she said.

With files from Canada Tonight