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The Average Debt by Age in Canada

Written by Jessica Steer
Whether you are just starting out on your own or nearing retirement, chances are that you have at least some debts or have been in debt at one point in your life. This can be anything from credit card debt to a mortgage. There are different forms of debt, and in some ways, debt isn't all that bad.
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    It can help you build your credit score and reach your goals. That said, you do have to be careful about how much debt you have because it can be really easy to have too much debt and not be able to get out of it.

    What stage of life you are in will make an impact on if you have any debt and what kind of debt you have. How much does the average balance in their 20's owe? What about their 30's? How about retirement age? Well, let's find out.

    Average Amount of Debt for Canadians

    Debt is something that Canadians have adapted too. While you don't want to drown yourself in debt, many people use financing to get ahead, purchase a vehicle, purchase a home, or even just pay their bills when monthly income doesn't quite make ends meet. With that said, the average consumer debt for Canadians might be higher than you expect. Not including any mortgage debt, the average is $21,183. This does include:

    • Credit card debt
    • Personal loans
    • Line of Credits
    • Vehicle loans
    • Payday loans

    Pretty much any form of secured debt or unsecured debt that isn't a mortgage or a form of financing that taps into your home equity.

    Average Debt with a Mortgage

    When it comes to figuring out the average debt amount per Canadian, including mortgages, the average then goes from $21,183 to somewhere around $75,000. This may seem confusing since mortgages are often much higher than $54,000, but it is accounting for equity. Even though you may owe a lot on your mortgage, that home is still worth something which means, if you get into a rough situation, you can sell the home to pay off some or all of what you owe.

    Average Household Debt

    The number above just refers to the average debt amount for each individual in Canada, it doesn't refer to Canadian household debt statistics. As you can imagine, that number is higher. However, Canada isn't the country with the overall highest household debt. That would be the United States and China.

    There are no firm numbers on what the average household debt is in Canada, other than that it's high and considered to be the highest in all of the G7 countries. The G7 are an informal group of countries that are considered to have advanced economies. These include:

    • Canada
    • France
    • Germany
    • Italy
    • Japan
    • United Kingdom
    • European Union

    With that in mind though, if you multiply the average individual debt by 2, you get $42,366 and it's pretty much safe to assume that this is close to the actual number. That's actually a pretty high amount of debt. Especially since that number doesn't include a mortgage or home equity debt. However, it does depend on your annual household income.

    The general rule of thumb to keep control over your debt is to not exceed the 28/36 rule. How this works is no more than 28% of your income should be spent on home-related expenses, including your mortgage. Less than 36% of your income should be put towards housing expenses as well as all other expenses, including debt. This can be hard to achieve though. Sometimes, with debt, there really is no alternative.

    The Number of Canadians in Debt

    Most Canadians have accepted debt as a normal part of their daily life. With that said, it probably isn't that surprising to learn that around 75% of Canadians have some form of debt. Out of that 75%, 30% of those have high debt levels that negatively impact their life.

    Average Credit Card Debt for Canadians

    When it comes to credit cards, many Canadians use them for their everyday purchases. The average Canadian can spend up to $2,500 per month on their credit cards. They make up a large chunk of personal debt. The average credit card outstanding balance sits around $2,100 per Canadian.

    Credit cards are a convenient way to borrow money. You have an allotted credit limit you can reach, and once that is maxed out, you can't spend anymore until you have paid off what you owe. That said, if you let your credit card balance get too high, it can be very difficult to pay off. This is because credit cards are high interest debt. Their interest is compounded daily and added up for your monthly interest amount owing, and paying this doesn't even touch the principal amount. The longer the balance sits there, the more you pay. Your minimum payments mostly just cover the interest and don't have much of an affect on how much is left owing on your balance. You need to make large payments in order to see the balance go down.

    Average Debt by Province

    One of the factors that affects the rate of debt is cost of living. Different areas of the country will have different average debt amounts because of this. This is just an average though. Many people will have numbers much higher or lower than the average we give.

    Province Average Debt
    British Columbia $21,940
    Alberta $25,056
    Saskatchewan $22,582
    Manitoba $16,965
    Ontario $21,405
    Nova Scotia $20,702
    New Brunswick $21,888
    Quebec $18,429
    Newfoundland and Labrador $22,909
    Prince Edward Island $22,239

    Average Mortgage Debt by Province

    The average mortgage debt per province is based on the current housing market. Those provinces with higher housing prices will have higher averages than those with lower housing prices. This makes it no surprise that British Columbia and Ontario have the highest averages because they are two of the most expensive provinces in Canada to purchase a home.

    Provinces/Territories Average Mortgage Debt
    British Columbia $487,366
    Alberta $339,860
    Saskatchewan $260,163
    Manitoba $272,728
    Ontario $462,701
    Nova Scotia $258,677
    New Brunswick $203,216
    Quebec $237,517
    Newfoundland and Labrador $232,851
    Prince Edward Island $251,957

    Average Debt by Age

    Another factor to consider when it comes to average debt in Canada, is age. Different age groups will have different debt averages. That said, these numbers might not be where you originally thought they were. Here are the numbers from Equifax Canada.

    Average Debt for ages 18 to 25

    The average debt amount for those ages 18-25 is lower than you may think. Often, Canadians these ages mostly have credit card debt and student loans. Sometimes, they do have car loans though. This means their debt isn't going to be as high as someone more established who maybe owns a home or a few vehicles. The average debt is only around $8, 071.

    Average Debt for ages 26 to 35

    The average debt for those between the ages of 26 and 35 is $17,138. That's over double of the younger age group. Since this is non-mortgage debt, more often than not it's made up of multiple debts including credit cards, line of credit, personal loans and/or vehicle loans. Really, there are so many different ways to accumulate debt. That said, not all debt is bad and, even though this is a high number, what matters more is how those measures are measured against your average income.

    Average Debt for ages 36 to 45

    When we get to the age group of 36 to 45, the amount jumps again; this time to $25, 703. Again, this is often made up of the same mixture of debt. More often than not, there is also mortgage debt added to this.

    Average Debt for ages 46 to 55

    Between the ages of 46 and 55 is when many Canadians seem to have their peak amount of debt. It averages around $32,155. This is a peak age for when people tend to make large purchases and large investments. From here, the debt amounts seem to get smaller.

    Average Debt for ages 56 to 65

    The average debt for Canadians aged 56 to 65, is similar to that of those aged 36 to 45. It's only slightly larger at $26,652. This is either because they don't purchase as much, or they have started paying off all of their debt. Either way, this is a good thing. You ideally want to have minimal debt when you reach retirement age.

    Average Debt for Ages 65 Plus

    For those aged 65 plus, the amount of debt is the second lowest of all of the age groups at $14,610. We don't know if this is all debt because this number is excluding mortgages, but it's ideal to not have peak debt amounts.

    High Debt Amounts in Canada

    High debt amounts in Canada aren't judged by the dollar amount of debt that you have, but by the percentage of your income. A manageable debt load looks different for everyone. With that in mind, the recommended debt load is around 35% of your overall income. Anything above 43% is considered to be really high and can be difficult to manage, especially if your income changes for any reason.

    When your debt-to-income ratios are collected, your rent and mortgage expenses are included. That said, everyday bills and such aren't included. This is why lenders won't lend to you if your ratio is 45%-50% or higher if it can even get that high in the first place.

    Difference Between Good Debt and Bad Debt

    You may be wondering how there is such a thing as good debt or bad debt. Well, it really just depends on how that debt affects you. If it has a positive influence on you and allows you to generate income in some way, that's considered good debt. Bad debt is other forms of consumer debt like credit cards and loans, these don't earn you any more money. If anything, they actually cost you more in the long run.

    To break it down a little bit further, some examples of good debt are student loans and mortgages. That said though, even though these can benefit you in the future, you need to be able to afford them in the interim. If you can't make the loan payments or the mortgage payments then the good aspects of the loans are forfeited. This is why it's important to verify that you really can afford something before you decide to take the leap.

    What Happens if You Can't Pay Your Debt?

    When it becomes difficult to pay back the money that you owe, that's when things become difficult. Every missed payment that you have makes a negative impact on your credit score. Once you miss a certain number of payments, then lenders will start taking you to collections. Being in collections will have another negative impact on your credit score. If the loan you can't pay is a secured loan, then the asset that you put up against the loan will be seized. If it gets to the point of collections and you are still unable to make an arrangement and make your payments, then you may have to consider contacting the government agencies that provide consumer proposals or even bankruptcies.  

    Consumer proposal is when you go see a licensed insolvency trustee and they can help you to set up arrangements to make your payments manageable and/or write them off. This will have a negative impact on your credit report, and you will have to build your score back up. This will be written off your credit report 2 years after everything is paid off.

    As a last resort, bankruptcy is also an option. This is when you can essentially write off your unsecured debt, but it also is extremely negative to your credit score. It can make it difficult to get approved for more financing in the future. However, after 6 to 7 years, it will be written off your credit report.

    How to Prevent this from Happening?

    If you find that you are having trouble making your debt payments, it may be time to speak to a financial advisor. They may be able to help you come up with a debt repayment plan in order to avoid a consumer proposal or bankruptcy. One way they may do this is with a debt consolidation loan. This turns all of your debt payments into a single monthly payment. With rising costs, and soaring inflation, this is a great way to take control of your money management.

    However, your credit rating will come into account to see if you are eligible for the loan. This is an ideal option when dealing with debt owed to credit card companies. You are already reducing your cost by eliminating a significant amount of interest. Interest rates on loans are much lower than those on credit cards, even those with high interest rates.

    Ways to Avoid Significant Amounts of Debt

    While being debt free isn't always doable, there are things you can do in order to help mitigate your total debt and improve your overall financial health. The first thing is to limit your credit card spending. Keep it to a reasonable amount of your disposable income, an amount you can easily pay off with one or two paychecks.

    Another thing you can do is to create an emergency fund. This fund can help you to pay for unexpected expenses as they arise, limiting the need to borrow money. It can be as easy as setting up a bank account where you deposit $100 every payday. This number will climb before you know it and there will be money when you need it. You can do the same thing in order to create retirement savings.

    You can also set up automatic bill payments directly from your bank account. What this does is eliminate the money so you can't spend it, but it still pays what you need it to. It's simple to set up and an easy way to avoid carrying debt for bills that you have to pay. It also allows you to define what it considered to be extra money, and what is needed to pay your bills every month.

    One of the most important things you can do in order to limit the amount of non-mortgage consumer debt that you have is to hold yourself accountable. Check your accounts and statements at least once a month. Create financial goals for yourself in order to give yourself a target to achieve. You will notice this will also relieve a lot of your financial stress.

    Final Thoughts

    Having debt can be a scary thing, but it isn't always bad. Debt is what helps you increase your credit score to allow you to do things like go to school, purchase a home, or buy a reliable vehicle. Sometimes, incurring debt is the only way to pay the bills and that's okay too. The one thing that you have to worry about when it comes to debt though, is keeping it at a manageable number.

    When you accumulate too much debt and you are no longer able to make your payments, that's when problems arise. This can then negatively affect your credit and make things much more difficult for you in the long run. For this reason, it's recommended that you keep your credit card balance as well as your total consumer debt balances low, limit your purchases and keep your debt-to-income ratio under 35%.

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