Nearly all Canadians believe the average household is in too much debt, and it looks like everyone is right.
The results of the Manulife Bank Debt Survey shows that 40% of indebted Canadians do not expect to escape their debt in their lifetimes. And before you assume that everyone is talking about mortgage debt, you should know that non-mortgage debt climbed from 46% in spring 2019 to 55% this fall. Three-in-five said they are carrying non-mortgage debt on credit cards, which is up 12% from the spring.
It seems like the main problem is with spending. From spring to fall of this year, the spending-to-income ratio climbed from 33% to 45%. When spending outpaces income, saving for something like a down payment on a home becomes difficult, and in some cases, mortgage payments may be impacted.
Out of Baby Boomers, Generation X, and Millennials, the oldest generation (Boomers) feel that they are in the best financial shape, with 60% of them believing they are better off than their parents were at the same age. Only 31% of Boomers worry about not being debt free.
Generation X believes they are the most in debt, they save the least, spend more than they make, and are the most skeptical about being debt free. More than half of Generation X say spending is outpacing income growth and nearly 50% believe they’ll never be debt free.
Millennials are struggling with debt like Generation X, but this generation is slightly more optimistic. Less than half of Millennials say spending is increasing faster than income, and 42% worry about never being debt free.
Manulife suggests that tech skills widen career opportunities for Millennials and increase the potential of higher paying jobs, which is something Generation X typically doesn’t tap into. Three quarters of Millennials say it is important to have access to financial plans online, preferably through an app.
"There is a financial wellness crisis, and it's affecting Canadians of all demographics," says Rick Lunny, President and CEO, Manulife Bank. "The good news is that there are intuitive, helpful tools out there to make people's financial decisions easier and lives better."
Clearly, Canadians are in too much debt, but how will this affect the housing market? The good news is that Boomers are confident in their financial future, and Millennials are optimistic. There could be a dip in activity among Generation X when it comes to moving up or making home improvements due to a lack of budget and savings.