Canadians Slow To Pay Off Debt
Aug 09, 2011
Two recent polls have shown that Canadians have been thinking about debt more than normal. Unfortunately, they seem to be doing little about it.
Although conscious of how much debt they have and wondering about how they can get rid of it, Canadians aren’t doing much to solve their debt problems largely because of the main reason they got into trouble in the first place: lack of cash.
A CIBC Economics poll has just shown that some 72 percent of Canadians owe money. Although more than 60 percent of those say they are making “good progress” toward paying it back, more than 40 percent also say that they see their debt as a major obstacle to achieving their financial goals.
More than 40 percent of Canadians surveyed say that they’re unprepared to handle their financial obligations in the event of an emergency according to a new BMO poll, and 26 percent have less than three months’ worth of emergency savings, and only three in 10 say they have enough money set aside to carry them for a year.
Broken down by age, the CIBC survey found that 35 – 44-year-old Canadians are most likely to hold various forms of debt, with 89 percent of that group saying that they held at least one form of debt. Those between 18 and 24 years of age and 65 and older were least likely to have debt. Geographically, Albertans are carrying the greatest amount of debt, while British Columbia has the lowest per capita.
A general rule of thumb according to financial planners is to have an emergency fund set aside that is equal to three to six months of income to use for unexpected household expenses.
When asked why their emergency funds are so small, most poll respondents replied that they’re too busy trying to pay off their debt or keeping up with day-to-day costs to put money aside. Forty-seven percent of poll respondents cited debt – including credit card and mortgage debt – as a factor keeping them from putting money aside, while 41 percent say their cash goes to meeting everyday expenses.
Both CIBC and BMO suggest Canadians of all income levels talk to a professional to discuss ways to prioritize their finances, reduce their debt and increase their savings – for example, by consolidating loans to pay less interest or using online banking tools and high-interest accounts.
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