Canadian Families Struggling With Record Household Debt Levels
CGA-Canada report says more than half of indebted Canadians are borrowing just to afford day-to-day living expenses like food, housing and transportation.
TORONTO, June 14, 2011 — While consumer spending may be down in the first quarter of 2011, many Canadians are continuing to struggle with record levels of household debt, according to the latest research report from the Certified General Accountants Association of Canada (CGA-Canada). In fact, household debt has reached a new all-time high of $1.5 trillion – and for those already feeling the strain of lower or stagnant incomes, or personal circumstances, the situation is dire.
“The debt of a typical household is rising,” says Rock Lefebvre, CGA-Canada’s Vice-President of Research and Standards and co-author of the report. “And the financial situation of certain groups of households is much worse than average and continues to deteriorate. This is concealed if you focus only on the national or aggregate picture.”
The survey-based report reveals several alarming trends, as single-parent families, retired Canadians, and those with annual household income of less than $50,000 face a bleak financial situation.
“The report confirms that more than half of indebted Canadians are borrowing just to afford day-to-day living expenses like food, housing and transportation,” adds Anthony Ariganello, President and CEO of CGA-Canada. “For these individuals, there is little hope for improved financial condition.”
Highlights and the full report, A Driving Force No More: Have Canadian Consumers Reached Their Limits? are available on the CGA-Canada website.
Among the key findings:
- Some 57 per cent of indebted respondents said daily living expenses are the main cause for their increasing debt;
- More than half – 58 per cent – said their household income had remained unchanged or decreased over the past three years, while 86 per cent of those whose income did increase said it did so only modestly;
- If household debt was spread evenly across all Canadians, a family with two children would owe an estimated $176,461;
- The debt-to-income ratio in households reached a record high of 146.9 per cent in the first quarter of 2011, compared to 144 per cent in late 2009;
- Savings rates inched down in 2010 and continue to cause concern. Some 27 per cent of non-retired Canadians commit no resources whatsoever to savings, even for retirement;
- Households with an income of $50,000 and under are six times more likely to be financially vulnerable in terms of debt-service ratio;
- The single-parent family is the only category where debt increases with age. Those families have two-thirds more debt than couples with no children;
- More Canadians are carrying debt into retirement, with one-third of retired households carrying an average debt of $60,000 and 17 per cent carrying $100,000 or more.
Lefebvre says that while the government has taken a number of important steps to address some identified shortcomings, household balance sheets aren’t noticeably recovering.
“It’s important that the dynamics of household indebtedness remain high on the radar of policy-makers,” says Lefebvre, “particularly when it comes to policies and incentives that encourage Canadians to improve their finances.”