Canadians Optimistic About Debt Except When It Comes To Unexpected Expenses

2017-08-10   minute read

Grant Bazian

MNP Consumer Debt Index

According to a recent Ipsos survey conducted on behalf of MNP LTD., the majority of Canadians feel they can cover next year’s living expenses without incurring more, despite concern about mounting consumer debt in Canada. In the survey, 56% said they won’t need to take on more debt next year for basic household costs, while the rest anticipate that some increase in personal debt will be unavoidable. The survey found that confidence is lacking when it comes to the prospect of coping with unexpected expenses. Only a minority are confident that they wouldn’t incur more debt if faced with a change in their relationship status like a divorce (33%), unexpected auto repairs or purchase (32%), having to take three months off work due to illness (30%), a job loss or wage decrease (2%), a death in the family (26%), or paying for someone’s education (25%).

The results point to a lack of emergency savings among Canadians. This is a real risk because many people who overextend themselves to the point of financial crisis do so as a result of unexpected life events, not just by day-to-day overspending. I always recommend having between three to six months of expenses saved up. The survey also found that three in ten Canadians are concerned that they or someone in their household could lose their job. With so many families already in the red, unexpected life events like a job loss can throw household finances into a tailspin. These types of unexpected expenses are often a catalyst for bankruptcy. Just one emergency can drain a family's bank account, making it impossible to cover current debts and pay basic living expenses. As debts continue to go unpaid, many can end up on the brink of filing for bankruptcy or a consumer proposal.

We shouldn’t be thinking of an emergency savings plan as a ‘nice to have’. Unanticipated home and car repairs, time off work due to layoffs or family emergencies — these are all life experiences that happen to virtually everyone at some point. So a rainy day fund is really a necessity.  

Despite Canadians’ apprehension about 'rainy-day' scenarios, most are broadly optimistic about how their debts have evolved over time and the future direction they’re likely to take. Three in ten Canadians (32%) think their debt situation has gotten better rather than worse compared to five years ago, while about half say it’s about the same. Moreover, nearly half (48%) expect their debt situation to be improved five years from now. When it comes to their retirement years, half (51%) agree they’re confident that they will be debt-free.

Other poll highlights included:

  • Men and Baby Boomers are more likely to be confident about coping with unexpected life changes without increasing their debt, while women and younger Canadians are less confident.
  • Compared to other provinces, Quebecers (33%) are disproportionately confident in their ability to cope while maintaining a stable debt load — particularly when it comes to paying for their education, or someone else’s. One in four Ontarians (24%), and two in ten residents of Alberta (21%), Saskatchewan and Manitoba (21%), Atlantic Canada (20%), and BC (19%) feel confident.
  • Men (58%) are more likely than women (53%) to agree they’ll be able to cover all living expenses in the next year without incurring further debt — Boomers (63%) are more likely than Gen Xers (51%) or Millennials (49%) to feel the same.
  • Men (57%) are significantly more likely than women (47%) to be confident they won’t have any debt in retirement. Millennials (57%) are the most confident about clearing their debt load by the time they reach retirement age, compared to 50% of Boomers and 49% of Gen Xers.
  • Millennials (39%) and Gen X Canadians (38%) are significantly more worried than Boomers (18%) about a potential job loss in the household.
  • Compared to five years ago, Quebecers are most likely to say their debt situation has gotten better (39%), followed by residents of BC (33%), Saskatchewan and Manitoba (33%), Ontario (31%), Atlantic Canada (28%) and Alberta (23%).
  • Five years from now, half of Albertans (52%) say their expected debt situation will be better, as do 49% of Quebecers, 47% of Ontarians, 47% of Saskatchewan and Manitoba residents, 46% of British Columbians, and 45% of Atlantic Canadians.

About the Survey

These are some of the findings of an Ipsos poll conducted between June 19 and June 21, 2017, on behalf of MNP Debt. For this survey, a sample of 2,002 Canadians aged 18+ from Ipsos' online panel was interviewed online. Weighting was then employed to balance demographics to ensure that the sample's composition reflects that of the adult population according to Census data and to provide results intended to approximate the sample universe. The precision of Ipsos online polls is measured using a credibility interval. In this case, the poll is accurate to within ±2.5 percentage points, 19 times out of 20, had all Canadian adults been polled. The credibility interval will be wider among subsets of the population. All sample surveys and polls may be subject to other sources of error, including, but not limited to coverage error, and measurement error.

To learn more about the survey and how MNP can help you manage your debt challenges, contact Grant Bazian, CIRP, LIT, President, MNP Ltd., at 1.877.363.3437or [email protected] 

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