A lack of financial literacy may be helping to fuel the boom in Canadian household debt, according to the results of a new survey from accounting firm MNP LLP.
Specifically, MNP’s latest consumer survey, which was carried out online by research firm Ipsos between March 27 and March 30 with a sample of 1,500 Canadians, indicates that a lack of basic financial literacy skills “may be intensifying Canadians’ consumer debt binge.”
For example, the firm reports that six in 10 Canadians said “they’re less than very confident” in both their understanding of the impact of interest rates on debt payments and their ability to set and follow a budget. In addition, two-thirds said they’re less than very confident in their ability to create a rainy day or emergency fund.
“The most alarming thing about the record consumer debt levels in Canada is the lack of basic financial literacy skills to manage the debt,” says Grant Bazian, president at MNP Ltd., the firm’s personal bankruptcy division.
The survey also found that more than half of Canadians are $200, or less, per month away from not being able to meet all of their financial obligations and that 31% said they already don’t make enough money to cover those obligations.
As well, almost half of survey participants said they’re concerned about how much debt they have and that these feelings of concern are “significantly higher among those who aren’t confident about their understanding of financial concepts like credit scores, the impact of interest rates on debt payments, bankruptcy or insolvency.”
Moreover, the survey found that the vast majority of Canadians have not sought out professional help with their debt concerns.
“Debt denial is a big problem,” says Bazian. “Many feel they can handle it on their own, or they don’t know where to turn, or they are too embarrassed to get help.”
Photo copyright: designer491/123RF