A Check-Up on the Financial Health of Canadians

Finance is a topic that is always on the minds of Canadians. Given this prevalence in our daily lives, our team at Ipsos Reid decided to take a snapshot of their current financial footing. And overall, the outlook is bright. The results indicate that financial health is continuing to improve among Canadians: average household net worth (i.e. total assets less total debts) increased by almost 2% in 2013 to an average of almost $289K per household. Much of the improvements in household net worth have been fuelled by increases in the value of real estate and investments.

Household debt is lowering

While the value of assets (such as real estate and investment) held by Canadians continues to rise, average household debt has declined in 2013, which also contributed to higher net worth. No doubt the message from the Bank of Canada telling Canadians to keep a closer watch on how much debt we have accumulated is truly resonating. In fact, the rate of consumer borrowing has slowed in each of the past three years.

But while the message of debt reduction is resonating with most Canadians, such is not the case amongst older households. Households headed by someone 65 or older who are in debt, on average have about $53K in household debt (which is up from $47K in the previous year); this is an increase of 14%. Even more so, we see increasing numbers of older households getting into debt at a time when they should be debt free. Back in 2008, almost 6 in 10 (56%) older households were debt free compared to less than half (48%) in 2013. Unless this trend changes, many seniors won't be able to make their dream retirement a reality.

That said, most Canadians continue to feel comfortable with the amount of debt they have accumulated, a result of the rate of household borrowing slowing and the continued lower interest rates. Less than one in five (16%) feel strongly they are having difficulty paying off their debt. Due to higher debt load, younger households are more concern with debt than older households. Although households headed by someone 35-44 are most burdened by debt, they are feeling increasingly comfortable with their debt load.

Canadians are thinking seriously about retirement

Retirement continues to be a top-of-mind issue for Canadians. About 4 in 10 (43%) Canadians strongly agree that being able to retire in comfort is a serious concern. The issue of being prepared for retirement is especially a concern for those who are approaching retirement (i.e. 45 to 54 and 55 to 64). This is not surprising if we examine how well prepared Canadians are for retirement. For example, Canadians between the age of 55 and 64 have indicated they need almost 600K in savings in order to retire comfortably. In reality, they have saved only $159K which translates to a readiness ratio of only 27%. In addition, we see the retirement readiness ratio of Canadians have not improved in recent years.

They are still skeptical about financial advisors

Financial advisors are trained to help Canadians be better prepared for retirement by formulating a plan to help them achieve their financial goals. But somewhat surprisingly, only 1 in 4 (27%) Canadians feel strongly a financial advisor could help them in today's economic situation. This lukewarm sentiment towards advisors is not new; we have observed this level of sentiment towards advisors for a few years now. We know that a mutually awarding relationship between an advisor and his or her client must have a high level of trust. But the economic downturn of 2008 and 2009 seem to have eroded the trust Canadians have towards financial advisors. But in 2013, we see trust rebounded which was largely influenced by a banner year in the stock markets.

These results are based on results from Ipsos Reid's Canadian Financial Monitor. For more information on this offering, please visit our product page here.