Rest assured that if you have debt – you’re not even close to alone. In fact, Canada has the highest household debt level among G7 countries1.
Yes, our country’s debt level makes the threat of recession and inflation much risker in general. However, as an individual, not all debt is bad.
While it’s clearly normal to have debt, it’s also natural to wonder how your financial situation compares to others. Let’s explore the average debt levels of Canadians. And we’ll provide tips on what to do if your debt is higher than average.
What is the average debt level in Canada?
According to Equifax, at the end of 2020 the average Canadian owed $72,950 in debt, excluding mortgages. This included:
- credit card debt,
- lines of credit,
- car loans, and
- personal loans.
Credit card debt is the most common type of debt in Canada. The average Canadian owes $3,929 on their credit cards. This is a concerning number, as credit cards often have high-interest rates, making it difficult to pay off the balance. Consumer debt has notably increased recently. The increasing debt is due two three main factors:
- Inflation has driven up the cost of everyday goods, causing Canadians to spend more per month. When inflation is high but paycheques don’t grow as fast, the average Canadian has less money leftover to spend. This results in the increasing reliance on credit cards to pay for daily necessities.
- Pent-up demand and travel following the pandemic and easing of restrictions and people making up for lost time.
- High interest rates on credit balances might mean overall debt increases for those unable to pay their credit card statements in full.
Additionally, the average Canadian owes:
- $20,165 in student loans,
- $21,717 in car loans, and
- $13,986 in personal loans.
Within Canada, the level of debt also varies across provinces. The highest average debt levels are British Columbia, Alberta, and Ontario. The lowest are in the Atlantic provinces2.This could be due to variations in income levels and cost of living in different provinces.
What is the average debt by age group in Canada?
Here’s a breakdown of debt by age, according to the latest fromStatistics Canada:
NOTE: The total debt measured included: mortgage debt, lines of credit, credit card debt, student loans, vehicle loans and other debt (doesn’t fit in a category).
What kind of debt is common by age in Canada?
The type of debt you have varies based on your age and generation.
- 18-29-year-olds, or Gen Z, are most likely to carrystudent loans and credit card balances. But older Gen Z and young Millennials are also taking on big mortgages as first-time buyers.
- 30-39-year-olds are likely to have a mortgage along with debt from a line of credit, a car loan (or two) and a credit card balance.
- 40-49-year-olds tend to have large mortgage balances and lines of credit. But they also have higher incomes and have moved past the expensive childcare years (on average).
- 50-59-year-olds are the time when people tend to pay down their debt rapidly – and increase their retirement savings.
- 60-69-year-olds are or are close to being mortgage-free. However, it’s becoming more common for retirees to carry a mortgage.
- 70+ year olds may use a line of credit to remain in their homes as long as possible.
Read more:Pay off debt or save for retirement: How do you decide?
What can you do if your debt is too high?
Is your level of debt higher than the average? Don't panic. There are steps you can take to help manage and reduce your debt.
1. Create a budget
The first step to managing your debt is to create a budget. This will help you:
- track your income and expenses, and
- identify areas where you can cut back and save money.
Be sure to include all your debt payments in your budget. And try to allocate extra funds towards paying off your debts.
2. Prioritize repayment
If you have multiple debts, it's important to select which ones to pay off first. Make the debt with the highest interest rate your top priority, as it will cost you more in the long run. Consider consolidating your debts into one payment with a lower interest rate to make it more manageable.
3. Cut back on expenses
Reducing your expenses can free up extra money to put towards paying off your debts. Consider cutting back on non-essential items like frequent restaurant meals, subscription services, and entertainment. You can also try negotiating with your service providers for a better deal or switching to a more affordable option.
4. Avoid taking on more debt
It may be tempting to take out more loans or use credit cards to cover expenses. However, this will only add to your debt burden. Instead, focus on reducing your current debt. Then, start building a solid financial plan to avoid taking on more debt in the future.
5. Get help from a professional
If you find that you're struggling to manage your debt, don't be afraid to seek professional help. An advisor can help address any financial concerns or questions you may have. They can also help you:
- find ways to reduce your debt and save more money,
- review your current financial situation,
- make a plan that meets your short- and long-term goals,
- revise your plan as your needs change,
- avoid making emotionally driven decisions about your finances.
Remember, everyone's financial situation is different, so don't compare yourself too closely to others. Focus on improving your own financial health and seek help when you need it. A Sun Life advisor won’t judge you. They want to help.
