Financial decisions impact millions of Canadians daily, including those who live in Vancouver.
And while it would be nice for everyone to know the right answers when addressing finance and personal debt, this isn’t always the case.
A recent Loans Canada survey of 1655 credit-constrained Canadians revealed upwards of 70 per cent of those surveyed perceived themselves as financially literate, however when questioned about their financial habits, their performance told a different story.
The study affirmed that many Canadians are not saving regularly. And while over half of the survey respondents felt confident about their financial literacy, many admittedly are not tracking their expenses or spending habits or paying their credit card bills in full every month.
And the most surprising survey finding? Those who believe to be financially knowledgeable typically have more debt than people who claim their financial literacy is lacking.
Read all of LoansCanada.ca’s findings here.
Why are Canadians in Debt?
Canadians spend money fairly easily with the average Canadian consumer debt looming around $8,500, which doesn’t include their mortgage. Approximately 12 per cent have consumer debt of over $25,000.
Forming bad spending habits combined with not tracking expenses or paying credit card bills in full each month can lead to debt – quickly. The larger the debt, the more difficult it becomes to pay off.
People in Vancouver who lack basic financial literacy and management skills often find themselves in debt, making it challenging to climb out of a personal financial crisis.
Almost half of credit-constrained Canadians have taken out multiple loans, with 44 per cent doing so just to make ends meet.
The devastating effects of financial illiteracy and the consequences of debt
Canadians who are financially illiterate may find themselves in overwhelming debt, with poor credit ratings and derailed savings plans which in turn creates barriers to make ends meet or meet future goals or aspirations.
How can Canadians get a better grasp of debt problems?
Keep track of all debts
Making a detailed debt list will give a clear financial picture. This assessment will help form the best strategy to reduce or eliminate debt.
Maintain a monthly budget
Creating a monthly budget, which outlines financial obligations including car and mortgage payments, variable costs and debt repayment, is an important step. Get creative, determine needs from wants, and find new ways to reduce spending.
Pay bills on time, pay in full (if possible)
Many survey respondents believe that making the minimum credit card payment avoids interest charges. It doesn’t. Paying on time and in full helps avoid interest payments and potential credit score damage.
Lower the cost of debt
It’s smart to pay down high-interest rate debts first. Refinancing or consolidating high-cost loans may lead to a lower payment.
Financial well-being is achieved by improving financial literacy. Loans Canada’s research shows that being confident about financial knowledge does not guard against the pitfalls of bad financial behaviours.
"Canadians have access to free financial literacy resources, made available from both government and private institutions,” explains Cris Ravazzano, Loans Canada Chief Technology Officer. “For example, Canada.ca has a whole section dedicated to money and finances with great information that all Canadians can benefit from. And at Loans Canada we're always creating educational content about credit building and debt saving strategies. I think more effort is required to increase awareness about these types of resources."
Gaining and maintaining financial literacy is the foundation of good financial outcomes and greater financial health as a whole.