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Debt can get a bad name, but the truth is debt is a part of life for most Canadians. Total consumer debt recently climbed to $2.46 trillion in Canada, and non-mortgage debt reached $5.9 billion in Q1 of 2024. But if debt can be good, how are you supposed to know when you’re swimming in the deep end?
Different life stages, like being a student, buying a house, or retiring, may mean taking on debt. While everyone’s situation is unique, knowing where you stand financially—along with staying informed about financial planning, reading advice about saving, and learning credit card basics — can help you decide where to go next on your financial journey.
In its most recent report on household debt, Equifax provided a breakdown of average non-mortgage debt by age group and the delinquency rate (the percentage of people with past-due debt).
While viewing these numbers as a comparison is useful, it’s important to note that many life events or personal circumstances can lead to debt, and everyone’s situation is unique.
The average non-mortgage debt for individuals between the ages of 18 and 25 is just over $8,000, making it the lowest average amount amongst Canadians—even though this group has the highest delinquency rate. People in this age group are entering adulthood and have likely never managed large financial responsibilities. One of the first and most common major expenses they face is post-secondary education, with around half of Canadians in this age group holding an outstanding student loan.
Financial planning and decision-making play a major role for members of this age group and often predict how their financial futures will unfold. The human brain doesn’t fully develop until around 25, meaning part of the “prefrontal cortex”—the part responsible for planning, self-control, and decision-making—is underdeveloped. This can have a major impact on the type of financial decisions made and, when paired with a lack of financial education, can have long-term financial consequences.
Most individuals in this age group are either still in school or just starting in their careers, making debt difficult to manage. Paired with rising interest rates and costs of living, for some, this can lead to a high delinquency rate or using one debt to pay off another.
According to our recent survey, young Canadians are experiencing the impacts of soaring inflation, rising interest rates, and an overall high cost of living. When it comes to increased expenses, 33% told us that they've had to dip into their savings, and 25% have had to take on additional debt to cover daily expenses. For some young Canadians, these challenges can further contribute to an unmanageable debt load, with nearly half of respondents feeling very concerned about their financial obligations.
Members of this age group are in a great position to enter adulthood on the right financial foot. If you can minimize or effectively pay back your debt, now is the time to do so. One of the first steps to take is to create a basic budget. Your budget will act as a guide to managing your debt, building your creditworthiness, and achieving the financial goals you’ve set. Although having debt may feel new or unsettling, remember it’s a normal part of life for most. The key is investing in your financial literacy skills, sticking to your budget, and asking for help when needed.
A lot can change between your mid-twenties and your early thirties. Most individuals have finished school by this point and are starting to focus on planning for their futures and paying back existing debts, like student loans. Described as the ‘best years of your life’ by some, members of this age group experience many firsts. Your family may have grown, perhaps tying the knot with a partner or welcoming a baby. You may have moved to a new place or bought a house or new car. With these major life changes, it’s no wonder that the average non-mortgage debt load for this age group jumps to $17,191.
While these exciting milestones bring new or increased expenses, according to our recent survey, so has the rising cost of living. With a rising average debt load, 48% of respondents in this age group indicated that they are concerned about the impact increased interest rates and cost of living will have on their financial obligations. As a result, some individuals are taking on additional work, cutting back on non-essential expenses, and dipping into their savings.
If you’re in this age group, you’re probably seeing your financial responsibilities pile up, often without seeing a dramatic increase in your income to help cover new costs. While juggling new and existing financial commitments can be hard, it’s important to prioritize paying down your debt and focus on your financial future.
Following our 5 steps to debt repayment is a great place to start. One debt many individuals in this age group focus on first is their student loans. 54% of graduates report having student debt at graduation, with the average bachelor student owing $28,000 by their last year of study. With federal student loans now having 0% interest, it’s even more advantageous for Canadians to focus on paying back their student debt.
Planning for and protecting your financial well-being is necessary for a healthy financial future. Creating a budget is the first step, but building an emergency fund is important for protecting your financial well-being. According to our survey, 23% of respondents in this age group could not afford more than $100 in additional monthly expenses, with 25% unable to afford any increase. Life happens, though, and it’s essential to be prepared and avoid taking on more debt if possible. Now is the time to prioritize paying back debt from your young adulthood to help build positive credit, allowing you to reach new milestones and set yourself up for a healthy financial future.
Most people aged 36 to 45 have completed their post-secondary education and are well into their careers. While the average non-mortgage debt rises to $26,459, the delinquency rate begins to fall due to higher and steadier incomes. Much of the debt acquired by this age group is the result of large purchases, such as multiple car loans (averaging $33,267), lines of credit for home renovations, student loans, etc.
The increasing cost of living and rising interest rates are major contributors to high debt levels for this age group. According to Statistics Canada, 64.5% of 36- to 45-year-olds own their home. Changes in variable or even fixed mortgages, the rising cost of utilities such as oil and gas, and even food prices have caused many Canadians in this age range to underestimate their budget and rely on credit to make ends meet. Our recent survey found that 28% of respondents in this age group couldn’t afford more than $100 in additional monthly expenses, with 21% unable to afford any increase. In addition, 50% of respondents reported being very concerned about their financial obligations.
While an increased income can make it easier to manage new and existing debt, the cost of living is rising, and unexpected expenses can occur. If you don’t have an emergency fund, now may be the time to create one. Not having emergency savings may lead you to rely on debt to cover unexpected expenses, increasing your debt load.
Balancing your debt and savings is critical for this age group, though now is also an important time to focus on retirement plans and investments to avoid falling into debt later in life. Even if you’re unable to make large contributions now, beginning to invest money into an RRSP or RESP and giving it time to compound can have a significant impact on your future finances.
If you’re unable to service your debt while managing the cost of living and are falling behind on payments, a consolidation loan with your bank or even a consumer proposal with a Licensed Insolvency Trustee might be a good option to consider. Like a consolidation loan, a consumer proposal combines all your unsecured debt into one reduced monthly payment that you pay over a set period. While a proposal can take upwards of five years to pay off, it has a lesser effect on your credit score than bankruptcy and doesn’t affect assets or investments like your home, car loan or RRSPs.
Individuals in the 46 to 55-year-old age group have the highest average non-mortgage debt at $33,391. Various factors may contribute to this debt load, such as loans from an earlier age, multiple financial obligations, supporting others, and high-cost life events. For example, 46 is the average age of divorce in Canada. An uncontested divorce might cost only $1,540 in legal fees, but if they contest the divorce or one party wants to buy out joint assets, the cost can increase drastically. A loss of assets, on top of a reduced household income, makes divorce one of Canada’s top causes of financial difficulty.
Rising interest rates and a high cost of living also impact Canadians between the ages of 46-55. Our recent survey found that 64% of respondents in this age group felt generally pessimistic about their financial situation, with 50% being very concerned about their financial obligations. During financial uncertainty, members of this age group need to reassess their budgets and create a plan for reducing debts as retirement age nears. Focusing on managing your debts and investing money into your RRSP now can have a meaningful impact on your future financial situation.
If you're struggling to repay your debt while managing the cost of living and are falling behind on payments, exploring a formal debt relief option such as debt consolidation through a consumer proposal may be a good idea. A consumer proposal allows you to consolidate your unsecured debt and pay all or some of it back in monthly payments and/or lump sum, interest-free amounts. While a proposal can take upwards of five years to pay off, it has a lesser effect on your credit score than bankruptcy and doesn’t affect assets or investments like your home, car loan, or RRSPs.
Non-mortgage debt levels start to drop for individuals aged 56-65 to an average of $27,345. Members of this age group are reaching the end of their careers and might be re-evaluating income streams and assets as they transition into retirement. If you’re in this age group, it’s time to consider your long-term plans and realistically estimate your retirement income.
It’s important to consider what your retirement plan will look like and what your expenses might be. Do you plan to make any renovations to your home to ensure it remains accessible as you get older? What about the cost of a potential care home down the line? Many Canadians live on a fixed income once they retire, making managing new expenses and paying down debt much more difficult. Using strategies for paying down your debt now can lead to a more comfortable, stress-free retirement.
The reality is that many Canadians carry debt into retirement, whether in mortgages, lines of credit, or credit card debt. Paired with a higher cost of living, we found that 58% of Canadians aged 55+ generally feel pessimistic about their financial situation, with most unable to manage additional expenses above $400.
If you still have debts at this age, including debt payments in your retirement budget or planning to pay them in full before retiring is important. If you’re finding it difficult to make your debt payments, considering a formal debt relief option such as debt consolidation through a consumer proposal may be a good idea. While a proposal can take upwards of five years to pay off, it has a lesser effect on your credit score than bankruptcy and doesn’t affect assets or investments like your home, car loan or RRSPs.
Average non-mortgage debt drops for individuals aged 65+ to $14,093, making it the second lowest overall, though delinquencies go up. This is likely because most folks in this age range live on a fixed retirement income. Transitioning to a fixed income can be difficult for people who are used to a working salary and may now live off CPP (maximum $1,253.59/month) and OAS (maximum $754.05/month). When on a fixed income, even a small shift in your budget, like inflation, medical costs, or an emergency expense, can be harder to manage, making debt a sometimes necessary alternative.
Creating and utilizing a retirement budget is especially important for those living on a fixed income. Understanding your monthly income and expenses can help you build a plan for paying down your debt. If you’re struggling to manage your debt during retirement, it might be a good time to explore formal debt relief options with a Licensed Insolvency Trustee.
Debt will vary greatly throughout your life as you hit different milestones and see changes in your career, family dynamic or the economy. The debt loads described for each age group are only averages, and it’s completely normal to be slightly higher or lower. Above all else, debt is a part of life and not a judgement of your moral character. If you find yourself struggling with debt, for whatever reason -- whether it’s a “normal” amount or not -- you deserve help. Our team is here to get you on the path to debt freedom and a better financial future, so book online or call 1-884-4GT-DEBT today and get your free consultation.
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