ROGER SAUVÉ – Life Trends – Facts And Figures That Matter To You – Income, savings and debt … and pets
For the last 11 years, I have prepared a rather unique report on the Current State of Canadian Family Finances. I do this on a contract basis for the Vanier Institute of the Family based in Ottawa. The lastest report was released on February 16.
The report was a media hit and was covered by all the major TV networks, many radio stations and 30 to 40 newspapers across Canada plus the Cornwall Free News. See the link at the bottom of this column to access the full report. It is about you.
The biggest challenge in putting these reports together is that no two households are the same … some have lots of money and some have not, some have lots of debt and some do not, some have a lot of savings and assets and others do not and some are young and some not so young and many other combinations. You know where you stand.
As such, these reports can only capture some of the underlying trends relative to family budgets. These trends give us indications as to where we are going as a nation.
One of the most significant, enduring and disturbing trends seems to be our growing dependency on debt, especially credit card debt and lines of credit. Total debt, including mortgages, is now up to an average $96,100 per household. This average includes those that have debt and those that don’t. This debt load is now equal to 145% of average household incomes after income taxes. It was only 91% in 1990 and 111% in 2000. This is not good news. If you only include households that have debt, the debt load is now closer to $240,000 for those households.
According to the Bank of Canada, about 6% of Canadian households or about 825,000 households now spend more than 40% of their gross incomes just to pay interest on debt plus paying down some of the debt load. A Bank of Canada model assumes that one in four of these households will eventually default. The number with this high debt ratio could climb to 1.3 million or more by the end of next year. This is not good news.
Another startling trend discussed the report is that the value of the average home is now equal to five times the average household income and incomes taxes … it was only 3.2 times average incomes a decade ago. This is a clear sign of a housing bubble and bubbles do burst.
There are always a few cute surprises in these reports. Can you answer this question? What was the fastest growing consumer expenditure item over the last decade? The biggest increase was for the purchase of pet care services and not too far behind was the purchase of pets and supplies. Did you guess correctly? I think this is surprising, but I am not a pet owner. Half of all households now have a pet. Ask a friend the same question and see the response you get.
On the not so cute side, big spending increases also occurred in out of pocket medical and health services.
The largest decline in expenditures over the last decade was on child care in the home. The trend to small families and the growing number of dual income households explains much of this trend. More of the child care is now provided outside the home.
For the full report go to http://www.vifamily.ca/about/about.html and click on the title inside the box.
Roger Sauvé is President of People Patterns Consulting (www.peoplepatternsconsulting.com). Roger is an economist and demographer and lives in Summerstown.
Am I ever glade I don’t have an income. 40%, 91%, 111% or 145% of 0 is still 0.
I must be a rich man.