Print this page
Wednesday, 26 September 2012 13:05

Canadians need a re-education about their debt

Written by  Rose Sanchez
Rate this item
(0 votes)

Canadians aren’t listening to the message from the Bank of Canada, nor the federal government. Spending continues to rise and what’s worse is that a recent poll shows individuals are relying on debt to fund their futures.

A Harris/Decima poll showed if people needed to come up with $2,000 within a month, while 55 per cent were confident they could come up with money, 92 per cent would consider borrowing to meet that goal.
Borrowing money to fund a furnace is a lot different than borrowing to buy that big-screen television or the new car.
Thanks to plastic — debit and credit cards — a lot of people have lost touch with their true realities. It’s easy to spend money when it’s someone else’s.
Just whip out the credit card and wait for the bill to come next month to decide how much of it to pay off.
Or, pull out the debit card and don’t worry when there’s not enough of one’s own money in the account to cover the expense, the bank will be more than happy to provide a line of credit to carry a person over.
It’s becoming more and more evident that Canadians are relying far too heavily on credit to finance their lives. The Canadian debt-to-income ratio sits at a record 152 per cent. That ratio is how much a person owes, compared to how much a person earns.
For comparison sakes a good debt-to-income ratio is 20 to 30 per cent.
The problem with carrying all of this debt is the cost to do so, especially when interest rates rise. It’s also a problem with so many people carrying so much debt. According to a news article earlier this month, the Bank of Canada has declared household debt the number one risk to Canada’s economy.
Remember that debt-to-income ratio sitting at 152 per cent? That’s higher than what the U.S. faced prior to its mortgage crisis that contributed to the recession in 2008-09.
Canadians have become blasé about debt. It’s time for some new measures to be put in place to help people better understand debt the and risks involved when running in the red.
There should be mandatory classes for students starting in elementary school about all aspects of money management including budgeting, interest and credit.
The education should continue for the adults.
Before banks hand out money there should be a requirement for borrowers to take a test to show they understand how the system works.
People have to take written exams and road tests before legally taking a vehicle for a spin without a chaperone so the same should hold true for those looking to freewheel with money that doesn’t belong to them.
Rose Sanchez is assistant managing editor with the Prairie Post. Contact her with your comments about this opinion piece at This email address is being protected from spambots. You need JavaScript enabled to view it. .

Read 760 times