Image via WikipediaAs Canadian families prepare to celebrate Family Day next week, they find themselves in six figure territory. Unfortunately it is on the wrong side of the ledger. In its 12th annual assessment of the state of Canadian family finances, the Vanier Institute of the Family reports that average family debt has now hit $100,000. Not only that, the debt-to-income ratio, which measures household debt against income, stands at a record 150%, meaning that for every thousand dollars in after-tax income, Canadian families owe one thousand five hundred dollars.
The Institute, Canada’s foremost authority on family issues, has been sounding the alarm for many years over the issue of debt stress facing Canadian households. The debt-to-income ratio has been steadily climbing for the past 20 years. In 1990, average family debt stood at $56,800, with a debt-to-income ratio of 93%. The $100,000 figure represents a real increase of 78% over the past two decades.
Just as the debt ratio has climbed, the savings rate has slid downward. In 1990, Canadian families managed to put away $8,000, a savings rate of 13.0%. In 2010, that savings rate was down to 4.2%, averaging $2,500 per household.
Katherine Scott, the Institute’s Director of Programs, says, “Even though standard economic indicators tell us the recession is technically over, the confidence Canadian families have in their economic and financial situation is shaky. As governments at all levels craft their budgets for the coming year and look at cutting programs to reduce their deficits, they need to be mindful that the state of Canadian family finances continues to be fragile in many households.”
The stress of debt can be seen in many areas of family finances. The number of households which have fallen behind in their mortgage payments by three or more months climbed to 17,400 in the fall of 2010, up nearly 50% since the recession began. Credit card delinquency and bankruptcy rates also remained higher than pre-recessionary levels. If the government implements recommendations from the federal Task Force on Financial Literacy, families will have access to new resources to help better manage their financial situation.
The Vanier report notes that despite recent job gains, governments at all levels need to be concerned about the prospect of rising unemployment as workers who dropped out of the labour market attempt to jump back in – and as those who are working part-time hours (over 900,000 workers) continue to seek full-time hours.
In particular, families with younger members preparing to enter the workforce face tremendous pressure. Only 5% of the new jobs created since mid 2009 went to the 15-24 age group. The report also points out that the types of jobs being created are in the service sector, with very few returning in the manufacturing sector.
Author Roger Sauvė says this is one of the key findings of this report. “While in aggregate numbers, almost all of the jobs lost during the recession have returned. But the hidden reality is that those who lost their jobs are often not the ones who are landing the new ones. And many are finding work that doesn’t pay what their old jobs did.”
Among young people trying to better their job prospects with post-secondary education, about 57% of them are now financing part of their schooling with student loans, which may amount to an average student debt of $18,000 when they graduate.
This year’s report from the Vanier Institute also has a special section that looks at the experiences of middle-income households. It can be downloaded from the Vanier Institute website at: www.vifamily.ca.
For interviews and more informationon this report, please contact:
Katherine Scott
Director of Programs,
Vanier Institute of the Family
(613) 228-8500 x219
kscott@vifamily.ca
Director of Programs,
Vanier Institute of the Family
(613) 228-8500 x219
kscott@vifamily.ca
