Canadians may need a refresher in savings: bankruptcy rates are rising, and in 2003 the average Canadian household owed more than its annual take-home pay. Canadians over 18 carry, on average, 3 credit cards apiece. Perhaps it’s not surprising that one of Canada’s favourite savings vehicles turned 60 in 2006 with little fuss: Canada Savings Bonds. Often used as a way to teach the value of savings and interest to younger generations, the once-popular CSBs are facing new challenges in their seventh decade.

“No effort can be too slight to weigh in the scales of victory or defeat, no contribution too small to count.” – PM W.L. Mackenzie King, on a December 1942 poster advertising Victory War Bonds

The roots of Canada Savings Bonds stretch back to the First and Second World Wars when War Savings Certificates and Victory Bonds were introduced to help finance the war effort. After the war, the government continued the programme, both as a source of funds and as a way to encourage Canadians to continue to save. The first savings bonds in their modern form were released in 1946.

Jean Spear, MBE, was a war bride who arrived in Canada in 1944. Living with her parents-in-law, a common experience for war brides, she and her husband began to save for a home on his post-war salary of $150 a month. She says in an interview on the CSB website: “We started to house-hunt… that was a very, very eye-opening process. We realized how little money we had… this was when I was first introduced to Canada Savings Bonds. I could save small sums of money, buy a bond, tuck it away, and I knew that it was going to multiply. And when I started to work in later years I usually used the payroll plan, and I would have something taken off my salary and then when the savings bonds came out every fall I would still be a purchaser.”

These investments were popular because they were:

• Redeemable at any time without penalty;
• Extremely safe and secure (guaranteed by the government); and
• Easy to purchase with respect to method of payment, denominations available, and availability of purchase.

Over the years Canada Savings Bonds have been a part of many families’ savings programmes as well as a part of the cultural landscape. Television commercials – frequently appearing during Hockey Night in Canada – have ranged from the cartoonish ads of the 50s and 60s through the lyrical nature-focused ads of the seventies – “Growing… with Canada Savings Bonds…” to Internet and other ads today.

As a part of the 60th anniversary programme, the CSB website ran a story contest for Canadians to share their accounts of how savings bonds have contributed to their reaching their goals. One thing that is striking about many of the stories is how common an experience it is from coast to coast for bonds to be a generational gift from grandparent or parent to child. Although the contest is officially closed, individuals can still read or listen to, and contribute stories online.

Savings bonds today
Savings bonds today still operate much like the originals. However there have been significant additions to the programme:

• In 1977, regular interest “R” bonds and compound interest “C” bonds were introduced, a revolutionary change in which the old style coupon bonds were eliminated. Direct Deposit of interest payments was also made possible with the introduction of the new bonds.

• In 1995, a new RRSP option allowed investors to register specific Canada Savings Bond directly into an RRSP, The Canada RSP, without needing a self-directed plan.

• In 1998, the Canada Premium Bond was introduced.

Today, Canada Savings Bonds are on sale for 6 months of the year – ending April 1.

Threat to the CSB programme?
But the popularity of savings bonds has been falling in recent years, as interest rates remain low and other options, such as higher-interest savings accounts offered by so-called “virtual banks”, have cropped up. In 2004, the Ministry of Finance, under then-Minister of Finance Ralph Goodale, reviewed its Canada Savings Bonds Program. As a part of the review, the consulting firm Cap Gemini Ernst & Young was hired to assess the performance of the program and make recommendations on strategic options for the future.

They recommended ending the Savings Bond programme, and noted that the province of B.C. had ended its bond programme without public outcry. But Minister Goodale stated at that time that “The option of eliminating the Canada Savings Bonds Program is not on the table as part of this review. We are looking to update and improve our retail debt strategy, not to end Canada Savings Bonds.”

One hopes the programme will continue and future generations of Canadians will have their own stories to tell about the bonds that paid for trips, computers, tuition – and even retirement!