VANCOUVER—Canadian families increasingly are using credit to cover day-to-day living expenses, “a highly disturbing matter” that has pushed national household debt to $1.3 trillion, a new report says.
The Certified General Accountants Association of Canada warned today that 85 percent of households had outstanding debt on a credit card.
What’s more, 21 percent of Canadians who were in debt when surveyed said they no longer could manage their debt load.
“We judge the current level of indebtedness of Canadian households as a highly disturbing matter,” stated the report, which is based on a survey done in November.
Forty-nine percent of families with children under 18 said their debt had increased in the past three years, according to the online survey of 2,014 households, which claims a 95 percent likelihood of being accurate within 2.2 percentage points.
Lines of credit and credit cards account for the largest proportion of consumer debt, and the report said the escalation of debt “is primarily caused by consumption motives rather than asset accumulation.”
Today’s report also said one-in-our Canadians interviewed would not be able to handle an unforeseen expense of $5,000 while one-in-10 would have trouble with an unforeseen cost of $500.
Laurie Campbell, executive director of Credit Canada, a non-profit credit counselling organization, finds those statistics scary.
“If that is what it comes down to, that 10 percent of us would even struggle with something as minimal as a $500 unexpected expense, then it tells you how precarious this situation is.
“How many Canadians are actually living on the edge.”
Campbell believes the problem is larger than the current recession, especially given that the report was released in November and the economy has worsened since.
“Canadian have been living far beyond their means for so many years that the savings rate has plummeted,” she warned.
“The fallout is that Canadians have been relying on credit to such a large degree that they have very little room to manoeuvre.”
Campbell thinks the result will be a longer recession than in previous years because Canadians can’t spend their way out of it as easily as in the past.
“With savings rates being at an all-time low and debt being at dangerously high levels, Canadians cannot do that this time around,” Campbell said.
“The result is a prolonged recession.”
The only solution for Canadians deep in debt is to cut household expenses and start saving, she stressed.
The report also showed 43 percent of Canadians don’t feel confident their financial situation at retirement will be adequate.