First job and car, home, wedding, and child — paying for life’s milestones can add up, so how do Canadians find the money to cover them all? According to the TD Canada Trust Report on Savings, they don’t — at least not upfront. Forty per cent of Canadians find it a real struggle or impossible to save, so many of them rely on loans and lines of credit, credit cards and the kindness of friends and family to fill the gaps.
The report found the majority of Canadians say they are comfortable taking on debt when it comes to financing a down payment on a home (61%), buying their first car (57%), paying for post-secondary education (54%), starting a family (46%), and paying for their wedding and honeymoon (38%).
“A wedding, a car, a home — these are major costs. It can be difficult to juggle them, especially when they seem to come all at once,” says Kevin Moffatt, vice president, TD Canada Trust.
Although credit cards and loans can be used to for financing major life events, Moffatt says that using credit to afford major purchases can leave consumers with payments long after the initial excitement of the milestone has passed.
“A general rule is that your total monthly debt payments should not equal more than 40% of your gross monthly income. When you have several big expenses on the horizon, keep this guideline in mind to determine if you need to cut back or postpone a purchase to save up a bit longer,” he says.
Balancing debts and savings
Forty-one per cent of Canadians find it difficult or impossible to balance their current debts and save for the future while still enjoying their life today. To get their debt load under control, a number of Canadians consider tapping into savings (34%), selling assets (29%), consolidating debts (32%), getting a second job (27%), and even borrowing money from family (10%).
Moffatt says the most important aspect of balancing debts and savings is creating a detailed budget to get an accurate understanding of where your money is going and where you can find opportunities to save. “Take advantage of the free tools, like online cash flow calculators and budgeting templates, to help get in control of your finances,” he says.
TD Bank Group commissioned Environics Research Group to conduct an online omnibus survey of 1,022 Canadians 18 years of age or older. Responses were collected between January 23-27.