CGA-Canada Unveils Troubling Survey Findings on Household Debt

    TORONTO, Oct. 18 /CNW Telbec/ - Many Canadians are in denial about their
debt says the Certified General Accountants Association of Canada
(CGA-Canada). While only 14 per cent of Canadians admit their debt increased
significantly over the last 3 years, in actual fact, household debt has been
increasing annually by 4.7 per cent for the past 30 years -outpacing gains in
personal disposable income, assets and the GDP. Today, CGA-Canada releases its
report titled Where Does the Money Go: The Increasing Reliance on Household
Debt in Canada which reveals Canadians' attitudes on saving, spending and
their level of indebtedness.
    "Because Canadians have easier access to credit and spend more on
discretional goods and services, consumption rather than asset accumulation
has taken over as the leading cause of rising debt - confirming some worrisome
trends," said Anthony Ariganello, CPA (DE), FCGA, President and Chief
Executive Officer of CGA-Canada.
    A consumer survey commissioned by CGA-Canada found that saving is not a
priority for Canadians. One in five respondents could not handle unforeseen
expenditures of $5,000. And 25 per cent do not engage in any type of savings
activity, not even retirement savings. Figures show that the personal savings
rate has been declining since the early 1980s dropping from its highest level
of 20 per cent in 1982 to its lowest of 1.2 per cent in 2005. The decline in
savings is attributed to:

    - Housing value appreciation that boosts household net worth
    - Low interest rate levels that make savings less attractive and
      borrowing costs easier to bear
    - An aging population that triggers dis-saving of retirement funds
    - Slow growth in personal income that leaves less money available after
      personal consumption
    - Easier access to credit that lowers the need for a "saving cushion"

    Housing equity is often considered a viable alternative to savings and
one third of non-retired Canadians count on their home equity as a source of
retirement income. Interestingly though, home equity per owner was 5 per cent
lower in 2005 than in 1997.
    And while Canadians worry that they won't have enough money to retire, an
increasing number - 20 per cent - are tapping into their RRSP savings prior to
retirement, using funds primarily for day-to-day living purposes. "Canadians'
increasing indebtedness may leave Canada's aging society sandwiched between
having already committed yet unearned income to debt-service and the need to
speed up the accumulation of pension funds for rapidly approaching
retirement," said Rock Lefebvre, FCGA, CGA-Canada's Vice-President, Research
and Standards.
    Survey results also reveal that 25 per cent of Canadians did not think
that an interest rate hike, lower housing prices, wages or reduced access to
credit would negatively affect their financial well-being. This is
disconcerting considering that the effect of a 1 per cent interest rate hike
on a mortgage of $214,065 with a 5.5. per cent interest rate and 25 year
amortization period would increase monthly payments from $1,307 to $1,434 -
adding up to $1,524 in extra costs per year. "It is troubling that so many
Canadians seem unaware of the potential impact these changes may have on their
financial situation," added Lefebvre. "Although the economy has certainly
witnessed positive gains, Canadians should be mindful that no one is entirely
certain of the timing of a negative shock, of its magnitude, and of the type
of spill-over it can provoke".
    CGA-Canada suggests that individuals' should rely on their personal
circumstances and not solely on the rosy global economic outlook or their
credit limit when deciding how much debt they can assume. For instance some
Canadians are more exposed to income instability such as the workers in the
troubled manufacturing sector and single parents, unattached individuals and
the self-employed .The least wealthy 20 per cent of Canadians are also more
vulnerable to economic shocks because they have almost no housing equity to
back up their mortgage debt and no other assets to support their rising debt
    "Many Canadians think escalating debt and lack of savings are no cause
for concern in today's favourable economic conditions and few seem to fully
appreciate the harmful consequences of swelling debt into future," concluded

    CGA-Canada's report can be read at

    About CGA-Canada

    CGA is the fastest-growing accounting designation in Canada. The CGA
designation focuses on integrity, ethics and the highest education
requirements. Recognized as the country's accounting business leaders, CGAs
provide strategic counsel, financial leadership, and overall direction to all
sectors of the Canadian economy.
    The Association sets standards, develops education programs, publishes
professional materials, advocates on public policy issues, and represents CGAs
nationally and internationally. The Certified General Accountants Association
of Canada represents 68,000 CGAs and students in Canada, Bermuda, the
Caribbean, Hong Kong, and China.

For further information:

For further information: Taylore Ashlie, Director, Communications,
CGA-Canada, (604) 605-5055, Cell: (604) 307-0212,

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