Many Canadians are in denial about their debt, according to a report from the Certified General Accountants Association of Canada (CGA-Canada), which reveals Canadians’ attitudes on saving, spending and their level of indebtedness.

While only 14% of Canadians admit their debt increased significantly over the last three years, in actual fact, household debt has been increasing annually by 4.7% for the past 30 years, outpacing gains in personal disposable income, assets and the GDP, CGA-Canada says.

“Because Canadians have easier access to credit and spend more on discretional goods and services, consumption rather than asset accumulation has taken over as the leading cause of rising debt – confirming some worrisome trends,” says Anthony Ariganello, president and CEO of CGA-Canada.

A consumer survey commissioned by CGA-Canada found that saving is not a priority for Canadians. One in five respondents could not handle unforeseen expenditures of $5,000. And 25% do not engage in any type of savings activity, not even retirement savings. Figures show that the personal savings rate has been declining since the early 1980s dropping from its highest level of 20% in 1982 to its lowest of 1.2% in 2005.

The decline in savings is attributed to:

  • Housing value appreciation that boosts household net worth;
  • Low interest rate levels that make savings less attractive and borrowing costs easier to bear;
  • An aging population that triggers dis-saving of retirement funds;
  • Slow growth in personal income that leaves less money available after personal consumption; and
  • Easier access to credit that lowers the need for a “saving cushion”.



Housing equity is often considered a viable alternative to savings and one third of non-retired Canadians count on their home equity as a source of retirement income. Interestingly though, home equity per owner was 5% lower in 2005 than in 1997, CGA-Canada says.

And while Canadians worry that they won’t have enough money to retire, an increasing number – 20% – are tapping into their RRSP savings prior to retirement, using funds primarily for day-to-day living purposes.

Survey results also reveal that 25% of Canadians did not think that an interest rate hike, lower housing prices, wages or reduced access to credit would negatively affect their financial well-being.

According to CGA-Canada, this is disconcerting considering that the effect of a 1% interest rate hike on a mortgage of $214,065 with a 5.5.% interest rate and 25 year amortization period would increase monthly payments from $1,307 to $1,434 – adding up to $1,524 in extra costs per year.

“It is troubling that so many Canadians seem unaware of the potential impact these changes may have on their financial situation,” says Rock Lefebvre, CGA-Canada’s vp, research and standards.

CGA-Canada suggests that individuals’ should rely on their personal circumstances and not solely on the rosy global economic outlook or their credit limit when deciding how much debt they can assume.

CGA-Canada’s report can be read at www.cga.org/canada/debt.