This is the time of the year when everyone starts reflecting on the last 12 months and then proceed to come up with a number of resolutions for the next 12 months. Saving more money, losing weight, paying off debt, exercising more and improving upon one’s career are usually the most popular objectives to have for the following year.
Whether or not people succeed is another story entirely.
A new poll out Tuesday suggests that for the fifth consecutive year the No. 1 goal for Canadians is to pay down their debt. The average consumer debt level is approximately $28,000, and the total Canadian consumer debt is close to $2 trillion excluding mortgages. With stagnant wages, a difficult labor market and a weaker economy due to falling oil prices, paying off this may be hard to accomplish.
CIBC released the results of its new survey and it found that less than one-quarter (22 percent) of Canadians want to pay off their debt this year, while 12 percent of Canadians want to build their savings. Paying bills and just getting by was third with 10 percent and budgeting was next on the list with nine percent. Retirement planning was at the bottom with a minuscule five percent.
These figures have been pretty much the same for the past five years, except budgeting and retirement planning garnered a higher response rate in the years 2011 and 2012.
“Not only have Canadians told us debt repayment is their number one financial priority for five years running, for 2015 we see an even greater number of Canadians focused on better managing debt in the year ahead,” said Christina Kramer, Executive Vice President of Retail and Business Banking at CIBC, in a statement. “While it is encouraging that paying down debt is important to Canadians, it is also important not to lose sight of longer term goals like retirement planning.”
Paying down debt is something that is a lot more important for those individuals on the cusp of retirement. Twenty-five percent of seniors aged 55 to 64 placed debt payment as their main financial objective, while 31 percent of Canadians 45 to 54 years of age iterated the same sentiment.
Although federal governments and central banks have encouraged consumer spending and borrowing through the means of artificially low interest rates, the Bank of Canada (BoC) has repeatedly warned over the past year that Canadians are overextended and have to start tackling their household debt levels.
BoC Governor Stephen Poloz announced in October that low rates are here to stay, but it didn’t please Moody’s to hear this confirmation. The overnight lending rate would stay at one percent for the foreseeable future because any rate hike could hurt millions of Canadians coast-to-coast.
“Weighing all of these factors, the Bank judges that the risks to its inflation projection are roughly balanced,” Poloz said in a statement. “Meanwhile, the financial stability risks associated with household imbalances are edging higher. Overall, the balance of risks falls within the zone for which the current stance of monetary policy is appropriate and therefore the target for the overnight rate remains at 1 per cent.”
Financial experts have warned the household debt levels are heating up and haven’t waned in the past decade, citing data from Statistics Canada.
The national savings rate in the Great White North is in between the five and six percent mark.
The CIBC telephone survey was conducted with 1,014 adult Canadians between Nov. 13 and 17. It contains a margin of error of +/- 3.1 percentage points.
