Most people think Canadians have too much debt, according to research published by Toronto-based Manulife Financial Corp. on Thursday.
The Manulife Bank Debt Survey found that virtually all Canadians (94%) agreed that the average household is in too much debt. The vast majority of the indebted population (84%) said getting out of debt is their top financial priority.
Most indebted Canadians indicated that debt makes them feel like they are unable to do things in life that they enjoy (30%), that it makes them feel vulnerable (19%) and that they fear having to live with it for the rest of their life (18%).
The overall attitude toward debt was resignation. Two-thirds of indebted Canadians (67%) assumed everyone else was in debt, while two in five indebted Canadians said they didn’t expect to become debt-free in their lifetime.
Household debt is rising
The incidence of Canadians who report having considerable non-mortgage related debts increased to 55%, up from 46% in Spring 2019. Canadians who reported having non-mortgage related debts on credit cards increased to 60%, up 12 points over the same period.
Further, Canadians’ spending is outpacing income growth, with only 12% of Canadians saying their income is increasing faster than their spending.
Manulife’s research found that baby boomers are currently in the best financial shape out of the three generations surveyed, while Gen-Xers are in the worst. Further, Gen-Xers and millennials are struggling more than baby boomers ever did.
Compared to people younger than 55, boomers said they were more comfortable with their overall debt levels (68% vs 56%) and their financial situation (79% vs 68%), and felt as though their debt situation is under control (54% vs 32%). Only 41% of boomers reported carrying non-mortgage related debt, compared to 64% of Gen-Xers and 62% of millennials.
Gen-Xers, who perceived themselves as the most indebted, reported saving the lowest portion of their after-tax income (11%). They were also the most likely to report a negative spending-to-income ratio (54% vs 46% of millennials and 38% of boomers).
Millennials experienced the most difficulty entering the workforce (14% of millennials said they struggled, vs 9% of those aged 41-69). However, millennials were the most likely to say their income is increasing faster than their spending (14% vs 10%) and were also the most likely to utilize technology to improve their finances.
Three in four millennials said it was important to have access to financial plans online, preferably through an app, and over half of indebted millennials who felt in control of their situation indicated that technology has helped them manage debt.
The value of advice
Three-quarters of Canadians said they knew where to go for good financial advice.
Among those interested in taking control of their debt, millennials were more likely to say they wanted a financial advisor (38% vs 21% of people 41-69), but boomers were most likely to know where to go for advice (84% vs 71% under 55).
The vast majority of Canadians said it was at least “somewhat important” to have a financial plan that supports their children well into adulthood (84%) and that prioritizes savings as well as investments (81%).