It’s January. That means Canadians must once again endure our most annoying annual ritual: RRSP season. Bay Street will spend hundreds of millions of dollars in the coming weeks to foster a sense of deep financial insecurity among the public (as if the Christmas credit card bills hadn’t already done that). They aim to convince us that our golden years will be spent in poverty and deprivation — except, of course, for those who pick the right mutual fund.

Despite the hard sell, Canadians have become pretty lacklustre about their RRSPs in recent years. The hangover from the dot-com meltdown still lingers. And most Canadians struggle just to pay their monthly bills, let alone put hard-earned money at the disposal of the money managers.

Indeed, net mutual fund sales were down 17 per cent over the first 11 months of 2006 — despite record stock market highs and the income trust expansion. Likewise, Statistics Canada reports that the proportion of Canadians holding RRSPs is falling. With global commodity prices in retreat, and runaway trusts being (partially) reined in, Bay Street’s sales (and commissions) can only shrink.

Meanwhile, Canadians have discovered a rather different, more mundane way to build financial security. Instead of entrusting their retirement hopes to manic financial markets, they are looking closer to home — literally. They are investing in their homes.

A recent Statistics Canada report, the Survey of Financial Security, provides dramatic evidence that Canadians are far more dependent on their humble abodes, than on the pointless paper chase of the stock market. The proportion of Canadians owning their own home increased to 62 per cent in 2005, possibly an all-time record (the survey is conducted only every few years, so precise year-to-year comparisons are not possible). More Canadians own their own home than hold even a dollar’s worth of RRSPs.

Most striking is the difference in the size of Canadians’ investments in their homes versus the financial markets. The median Canadian has $180,000 invested in their principal residence. In contrast, the median RRSP holding is only $30,000.

There’s also a big equity gap between home ownership and mutual funds. While home ownership remains a distant dream for too many Canadians, it is nevertheless one form of modest wealth accumulation that is reasonably accessible to most. In contrast, the challenge of accumulating enough mutual funds to self-finance retirement is simply unfeasible for even comfortably middle-class Canadians. (For perspective, consider that $30,000 median RRSP “buys” a monthly pension of only about $175.)

The end result is that “home wealth” is spread relatively evenly across income groups, while financial wealth (even heavily subsidized RRSPs) is shockingly concentrated at the top of the income ladder. We can prove this by comparing median with average wealth: When something is very unevenly divided, the average is much higher than the median. For principal residences, average wealth is 26-per-cent higher than median wealth; for RRSPs, the average is 155-per-cent higher.

Other advantages of home wealth, of course, include more security and stability, greater insurability, and the capacity to actually enjoy the asset (by living in it) as you gradually purchase it. None of this is true of mutual funds.

Of course, there are risks and costs associated with home ownership. Real estate markets are also unpredictable — though less violently than the stock market, and as long as you are living in your house, the broader market trends are a sideshow. You must spend time and money to keep your house in shape (and anyone who has seen me attempt a home repair knows the stock market has no monopoly on “risk”).

At the end of the day, you have something to show for it. That’s a lot more than can be said for the outrageous management fees paid each year to well-dressed money managers sitting around Bay Street throwing darts at dartboards.

So the next time some pompous talking head urges you to buy into his fund, turn off the TV, head to the hardware store, and put some good sweat equity into what is your most valuable and enduring asset. On its own, home ownership does not constitute an adequate retirement plan; for that, we need healthy public and workplace pensions. But it’s a much better bet than playing the markets.

Jim Stanford

Jim Stanford is economist and director of the Centre for Future Work, a progressive labour economics institute based in Vancouver. He has a PhD in economics from the New School for Social Research in New...