November has become synonymous with the Movember campaign to raise awareness of the threats to male health from prostate and testicular cancer. But the month is also dedicated to what should be concerns about the threats to the financial health of families and businesses from innumeracy.
November is Financial Literacy Month, and there is more than bleak weather to dampen outlooks on that front. In the near term, higher interest rates threaten to magnify problems connected with the trend of Canadians spending more and earning less; in the long term, debt accumulation will compromise Canada’s economic well-being.
While a September survey co-ordinated by insolvency firm MNP Ltd. found increasing numbers of Canadians concerned about higher interest rates, 58% of respondents expected to take on more debt over the next year just to cover family debt and living basics. According to the survey, millennials were the least likely to say they have a solid grasp of how interest rates affect their finances.
Canadian household debt, in an era where inflated real estate prices are propping up finances, hit a record in 2017’s second quarter, according to Statistics Canada: 167.8% of disposable income. In other words, the average Canadian owes around $1.68 for every $1 in disposable income he or she earns in a year. You don’t have to be an economist to know that situation will not end happily.
Little wonder that Canada is now on an Oxford Economics list of countries with economies whose household debt poses a risk to financial stability.
Many of Canada’s debt problems are rooted in its residents’ financial fundamentals deficit.
With opposition on so many fronts to major projects that could help maintain the country’s economic momentum, the need to know the numbers to make informed decisions is more critical than ever.
Educating people on financial basics in the home, on the street and in business needs to become a priority, because the long-term damage from neglecting that education will go well beyond individual finances.