Financial Literacy month is an important time to discuss ways to encourage short and long term saving goals. Perhaps even more relevant is the need to address debt management tactics.
Based on Statistics Canada results, Canadians' ratio of household debt to personal disposable income was 66 percent in 1980. Fast forward to recent findings and that ratio has reached 163 percent. This increase translates into households owning more than $1.63 for every dollar of disposable income.
Canadians on a whole are tracking higher debt to income ratios than U.S. or British counterparts. Somewhat insulated from the intensity of the 2008 economic downturn, Canadians have taken advantage of low interest rates. In a recent Bank of Montreal study, 20 percent of Canadian said that if the interest rate on their mortgage increased by just 2 percent, it would put them out of their homes as they wouldn't be able to afford it.
Canadians continue to spend and have suffocatingly high unsecured debt issues. Our comfort in carrying high amounts of unsecured debt is staggering. Currently, there is 50 billion dollars owed in unsecured debt and loan payments.
Did you know that a university graduate carries $28,000 in unsecured debt. Canadians aged 50 or older owe $84,000 in unsecured debt and 47 percent of this cohort have saved less than 25 percent of their savings goals. Those aged 30-49 owe $67,000 in unsecured debt.
An even more alarming debt statistics involves retirees. Owing $69,000 in unsecured debt, with $37,000 related to credit card balances, it must be immensely difficult for retirees to implement effective repayment plans while operating on a fixed income.
Although current interest rates remain low, at some point they will change -- meaning -- they will increase and when they do, will Canadians be ready?
Here are some practical tips to address debt reduction in realistic and practical ways before the situation becomes almost unmanageable:
For questions about ways to save or to build financial literacy awareness, please contact us. We're here to help so that you can focus on what you do best.
On November 1, the Canada Revenue Agency announced that the maximum pensionable earnings under the Canada Pension Plan (CPP) for 2014 would increase. This means that effective January 1, 2014 the new ceiling moves from its current level at $51,100 to $52,500.
The $1400 change takes into consideration the growth in average weekly wages and salaries in Canada. The ceiling means that eligible contributors to CPP who earn over $52,500 in 2014 will not be required or permitted to make additional contributions to the CPP.
Other important figures to remember:
2014 Maximum annual contributions to CPP:
For questions about legislative updates including CPP or Old Age Security quarterly updates, please contact us. We're here to help so that you can focus on what you do best.
Did you know that 9 million Canadians struggle with low financial literacy? What is financial literacy anyway?
According to the Financial Consumer Agency of Canada, financial literacy is having the knowledge, skills and confidence to make responsible financial decisions. Based on the spending and savings habits of Canadians, it is apparent that a month focused on financial literacy is warranted. Good thing November is dedicated to Financial Literacy and supporting Canadians enhance their financial know how.
Statistics and survey results tell a story that reflects concern across the board when it comes to how well Canadians do with savings goals and debt management. ABC Life Literacy reported that 35 percent of Canadians don't have any savings or investments; and the average savings in an RRSP is only $55,000.
Although the statistics are discouraging, there are practical ways employers can help encourage employees to feel that adopting better savings habits and debt management skills are within their grasp. Understanding pension plans doesn't have to be a scary undertaking. By adopting some common sense best practices, employers can provide resources to assist employees easily navigate what may appear to be the choppy seas of debt management.
Here are some tips to help employees steer for the calm shores created by realistic savings goals:
Hold Education Sessions
Make it Easy and Fun
Finding ways to engage employees and start them down the path of developing good savings habits often is the most difficult part of the process. Once employees understand why they should get goals and targets for their short and long term plans, their future as well as the financial well-being of our nation will benefit.
For more information about savings tools or planning sessions to meet your specific needs, please contact us. We're here to help so you can focus on what you do best.
Dave Dickinson, B.Comm, CFP, CLU, CHFC
Experienced Benefits Specialist ready to optimize your group benefits and pension plans.