Where Does the Money Go: The Increasing Reliance on Household Debt in Canada
AbstractRecent studies show that Canadians are increasingly worried about their financial wellbeing at retirement and into the golden years. Counter-intuitive as it may seem however, the household savings rate continues to plunge as Canadians take on more and more debt. This paper analyzes the level of debt of Canadian households and the risks associated with the rising level of the debt burden. To this end, the paper integrates the results of a public opinion survey with an analysis of available statistical information. The analysis shows that the financial situation of least wealthy households may be deteriorating more aggressively than that of the overall household sector. Such groups as single parents, unattached individuals, self-employed, and individuals with modest wealth may be particularly sensitive to income instability, increasing interest rates and changes in the housing market. The gradual but steady switch from defined-benefit to defined-contribution pension plans shifts the burden of responsibility for accumulating sufficient retirement funds to households. However, this is not accompanied by an increase in either passive or active household savings.
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Bibliographic InfoPaper provided by Certified General Accountants Association of Canada in its series Working Papers with number 071002.
Length: 114 pages
Date of creation: Oct 2007
Date of revision:
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Web page: http://www.cga-canada.org
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household debt; household finances; savings; wealth; household spending; income shock; assets price shock;
Find related papers by JEL classification:
- D1 - Microeconomics - - Household Behavior
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