Canadians head into Black Friday ready to shop, unprepared for more debt

Manulife Bank survey reveals that despite claiming to understand debt management, many Canadians aren’t meeting debt reduction goals and feel unsupported by their banks

• Knowledge doesn’t cut it: More than half of Canadians claim good knowledge of debt management (54%), however, household debt has reached record highs¹ and only a minority (41%) are comfortable with their debt
• Need for allies: Only one in six Canadians believe their bank helps them pay down debt (16%) and puts their needs first (17%); however, those with advisors are 60% more likely to be satisfied with overall financial health
• Missing the mark: Many Canadians say being debt-free is a priority; however, less than a third of debtholders (31%) achieved debt reduction goals in the past year
• Debt impacts health: Most Canadians (53%) believe financial challenges take a toll on mental or emotional health, and a third (34%) on physical health
• Silent treatment: More than 30 per cent of Canadians are embarrassed or unsure of whom to talk to, and 55 per cent seldom talk about own debt with friends or family

TORONTO, Nov. 23, 2017 /CNW/ – Canadians will tap, swipe and click their way through Black Friday, Cyber Monday and into the holiday shopping season under a cloud of debt, despite a majority claiming they know how to manage debt (54%) and saying they are committed to becoming debt free (64%).

While being debt-free is a priority (64%) according to a survey released by Manulife Bank of Canada, Canadian household debt-to-income is at record levels². While almost half of debtholders surveyed (44%) said they had reduced their debt burden over the past year, (31%) actually met their debt reduction goals.

“When it comes to debt, knowledge alone does not equal power,” said Rick Lunny, President and CEO of Manulife Bank. “There is a clear gap between what Canadians say they know about managing debt, their good intentions, and their ability to do something about it.”

Nearly one-quarter (24%) of Canadians also said they are embarrassed to talk about how much debt they have. Nearly 40 per cent could not say they knew whom to talk to about debt management, while more than half said they seldom have the conversation with friends or family (55%).

Canadians lack confidence in their bank’s willingness and ability to help with debt. While more than seven in ten (71%) would like to be more confident about financial decisions and most look for guidance from their banks to help pay down debt, only a small number actually believe their bank helps them reduce debt (16%) and makes their interests a priority (17%). However, 46 per cent of respondents said they simply do not know how their bank could help.

This despite many Canadians recognizing the link between health and wealth. Nearly nine in ten (88%) said financial issues impact other areas of individuals’ lives and that financial wellness positively impacts overall health and productivity at work. In addition, three-quarters believe financial literacy and support is key to avoiding financial issues, and that having access to financial counselling is beneficial.

However, more than half (53%) said financial challenges impact mental or emotional health, while more than a third (34%) also considered impacts to physical health.

“There is a very strong connection between health and wealth. People should feel confident that they have allies when it comes to managing and reducing debt. Beginning to talk about debt, especially with a financial advisor, is a very important first step. Canadians who do not have a financial advisor are encouraged to seek out somebody they can trust,” says Lunny.

Approximately half of those surveyed expressed satisfaction with their overall financial health (47%); most satisfied were those who worked with financial advisors (59%) in contrast to those without (36%).

Differences between homeowners and renters

Among more than half (54%) of Canadians claiming good knowledge of debt management, homeowners (60%) are significantly more likely than renters (42%) to say they do. Homeowners also indicated different financial priorities than renters, focusing more on savings and investments rather than preparing for unexpected expenses or interruptions of income.

For homeowners carrying mortgages, the key factor in choosing a mortgage was the interest rate. More than half (56%) of respondents put this on the top of their priority list, while only 11 per cent said the ability to pay down their mortgage as fast as possible was most important.

Mortgage holders also reported not having a very good knowledge of critical information, such as the consequences of missing a payment. One in ten were not certain on who their mortgage provider was.

The average level of mortgage debt has remained relatively steady at approximately $200,000 since Manulife Bank last surveyed Canadians in February 2017.