Canadians & personal finance

Dani is not alone in losing control of her personal budget. Canadians are more indebted than ever. And as levels of personal debt soar to historic highs, our savings are shrinking - and we are increasingly dependent on credit.

With the last big recession dating back to 1991, the current downturn presents millions of young Canadians with their first experience of a major crisis – and Dani is not alone in taking stock of her spending habits.

An overview:

More personal debt: Between 2001 and 2005 the level of personal debt in Canada grew steadily. In 2001, for each dollar of disposable income, the average Canadian owed a little more than $0.90, but by 2005, this figure had risen to $1.16. This spike is due to a combination of factors: relatively low interest rates and easy credit, along with increased incentives offered by competing credit card companies. This general trend is more accentuated in the USA, where in 2005 the average American owed $1.24 for each dollar of disposable income. (StatsCan)

Greater per capita debt: The per capita debt of Canadians rose 5.2 times between 1980 – when it was $5,470 – and 2005, when the per capita debt was $28,390. In the USA, it rose 7.5 times during the same period, from $ 6,510 to $48,700. (StatsCan)

Less personal savings: The personal savings rate in Canada, although consistently higher than in the USA, has been dropping. It peaked at 20.2% of annual income in 1982, but by 2005 this had fallen to 1.2%.  Contributing factors are greater personal consumption and higher mandatory transfers (income tax and contributions to security programs). (StatsCan)

Less household savings: In 1990 Canadian households saved an average of about $7,500 of annual income. This dropped to under $2,000 by 2002 and is now near $1,000. (Vanier Institute)

More consumption: In 1982 Canadians spent an average of 63.4 cents of every dollar of income on consumption and 20 cents on obligatory transfers. By 2005 they were spending 74.0 cents on consumption and 25.1 cents on transfers. (StatsCan)

More personal bankruptcies: There were 10,936 personal bankruptcies filed in Canada in April 2009, compared with 8,035 in April 2008. During the year ending April 2009, there was a total of 100,587 personal bankruptcies, up 23.2 per cent from the previous 12-month period. (Winnipeg Free Press, StatsCan)

Credit cards: 85% of indebted Canadians are carrying a balance on their credit cards.
Incomes rose – but not as fast as debt levels: The average household income rose between 2004 and 2007 – but debt levels rose faster. The average household debt, after tax and mandatory contributions, is now equal to 131% of average household income – a new record. (Vanier)


Sources:
Statistics Canada
The Vanier Institute
The Winnipeg Free Press