Canada's Wealthy Hoarding Cash While U.S. Counterparts Spend, Hurting Economic Growth
Canada's highest-income earners are exhibiting what economists describe as "seemingly cautious behavior" by holding onto their cash rather than spending it, creating a stark contrast with their American counterparts and potentially denying the Canadian economy a powerful source of growth. According to recent data and analysis, this divergence in spending habits between wealthy Canadians and Americans may be contributing to Canada's slower economic performance compared to the United States.
The K-Shaped Economy Divide
The United States is currently experiencing what economists have dubbed a K-shaped economy, where the wealthiest citizens are on a spending spree fueled by soaring stock markets while lower-income groups tighten their wallets amid rising financial stress. This dynamic has helped propel U.S. economic growth, with advance data showing the American economy grew at an annualized rate of 4.4 percent in the fourth quarter of 2025.
In contrast, Canada's economy grew at just 2.6 percent in gross domestic product (GDP) during the third quarter of 2025, with economists expecting the final quarter of the year to come in flat. This significant gap in economic performance highlights the potential impact of spending behavior differences between the two nations' wealthiest citizens.
Canadian Wealth Accumulation Without Spending
According to Statistics Canada's household wealth survey released recently, Canadian households with the highest income increased their net savings by 6.7 percent in the third quarter of 2025—the highest rate among all income groups. This occurred as work and investment earnings topped their increases in spending, creating a growing pool of unspent wealth among Canada's most affluent citizens.
Andrew Grantham, an economist at CIBC Capital Markets, noted in an analysis that while income gains among Canada's wealthiest have been "less pronounced than in the U.S.," this income group has indeed seen stronger income and wealth gains relative to other households in recent years. Yet their spending has remained "comparatively modest" despite these financial advantages.
The Wealth Disparity in Numbers
The statistics reveal significant wealth concentration among Canada's highest earners:
- The highest income group had an average of $195,337 in disposable income
- This group accounted for nearly two-thirds of Canada's net worth
- Their net worth averaged $3.5 million per household after increasing at the fastest pace in the third quarter
- Their investments grew by 10.6 percent during this period
- Their average mortgage costs rose just 2.1 percent, "the lowest rates of any wealth group" according to Statistics Canada
By comparison, the next highest-income group had nearly $110,000 of disposable income, while the lowest group had just $28,161 in disposable income. Meanwhile, the average savings rate for all income groups shrank in the third quarter as spending on basic items such as housing, utilities, insurance, financial services, transportation, and storage outstripped weak increases in wages for most Canadians.
Potential Reasons for Canadian Caution
Grantham suggested several factors that might explain why Canada's wealthiest are holding back on spending:
- Timing issues: Canadian equities rose last year after lagging the U.S. market, potentially creating a delayed spending response
- Economic conservatism: Ongoing trade uncertainty may be prompting cautious spending behavior
- Accumulated savings: Wealthy Canadians may be waiting for more favorable conditions before deploying their accumulated savings
"It could also reflect conservatism towards spending given ongoing trade uncertainty, and accumulated savings could possibly be spent if that fades," Grantham explained, suggesting that the current spending restraint might be temporary rather than permanent.
Economic Implications
The spending behavior of wealthy Canadians has significant implications for the broader economy. When high-income earners save rather than spend, it reduces overall economic activity that could stimulate growth through:
- Increased consumer spending in various sectors
- Business investment and expansion
- Job creation across multiple industries
- Tax revenue generation for public services
This cautious approach contrasts sharply with the United States, where wealthy Americans' spending has helped fuel economic expansion despite financial stress among lower-income groups. The divergence highlights how different national economic cultures and conditions can lead to substantially different economic outcomes, even among neighboring countries with closely linked economies.
As Canada continues to navigate economic challenges, the spending decisions of its wealthiest citizens will remain a critical factor in determining the nation's economic trajectory and growth potential in the coming years.
