Our Household Debt Reaches $1.3 Trillion and Continues to Grow
CGA-Canada finds one in five Canadians in over their heads
May 26, 2009
A new report by the Certified General Accountants Association of Canada (CGA-Canada) reveals that household debt has reached an all-time high of $1.3 trillion in 2008, yet Canadians perceive their financial condition to be better than it is. According to the report, Canadian families are financing consumption activity with unearned money as they increasingly reach for credit to finance day-to-day living expenses.
The report, Where Has the Money Gone: The State of Canadian Household Debt in a Stumbling Economy, is based on a consumer survey conducted in November 2008. The survey asked Canadians to reflect on the changes that had occurred in their household finances over the past three years, with a focus on household debt, income, assets, wealth, spending and savings.
“Household debt has increased significantly over recent years, jeopardizing the financial security of Canadian households,” says Anthony Ariganello, FCGA, President and CEO of CGA-Canada. “Many Canadians are not aware of how the economic downturn has impacted their financial situation and continue to load up their credit cards and lines of credit, while committing few, or in some cases, no resources to savings.”
In particular, 49 per cent of Canadian families with one or more children under the age of 18 reported that their debt had increased. Lines of credit and credit cards account for the largest proportion of consumer debt, with 85 per cent of Canadians reporting that they have outstanding debt on a credit card. Some 21 per cent of Canadians who are in debt say that they are in over their heads and can no longer manage their debt load.
“We need to recognize that the financial conditions of Canadian households have deteriorated,” says Rock Lefebvre, Vice President, Research & Standards of CGA-Canada. “The situation needs to be rectified not only to establish financial security and well-being for Canadians, but also to maintain a healthy economic environment.”
Lefebvre adds that there is an opportunity for government and the educational community to help Canadians improve their financial capability. More needs to be done in educating the public on money management, spending, shopping habits, warning signs of financial difficulties and obtaining and using credit.
Although CGA-Canada recognizes the importance of consumer spending for business development and for economic growth, a balanced approach to spending, saving and paying down debt is a more desirable option than trying to promote consumer spending as a solution for the current economic downturn.
To download a copy of the complete report, go to Where Has the Money Gone [PDF – 888KB, 126 pages].