Why Wasn’t There More Discussion About the Link Between Personal Debt and Financial Literacy?Nov 11, 2015
Heading to the polls for the fall election, the economy was an important issue for many voters. As such, there was no shortage of discussion from party leaders about the economy. But the economy alone should not have been the full story. Why wasn’t there more serious discussion about the rising household debt and the need for increased levels of financial literacy? While political parties weren’t short on tax breaks like income splitting and increasing the TFSA annual contribution limit to $10,000, where were the promises to help Canadians improve their financial literacy so they’re better able to deal with bad debt?
Until midway through 2014, Alberta was providing much of the growth for the Canadian economy. Since then the price of oil has been on a downward spiral. The abundance of high-paying jobs made Alberta a popular destination for jobseekers from across the country. However, times have been tough lately: Alberta lost 35,000 oil patch jobs. With Alberta no longer the go-to province for high paying jobs, this is likely to only add to the record household debt figures.
Politicians and economists have conflicting views on the effects of high household debt. Instead of encouraging Canadians to pay down debt when rates are low, during the election some politicians seemed to be encouraging Canadians to spend more. Some economists are worried if interest rates were to increase, a lot of Canadians would run into trouble. Other economists do not see the high level of household debt as a concern.
Financial literacy is a lifelong learning process. It’s a broad topic that needs the full commitment from political leaders for a number of reasons. For example, housing affordability is a major concern for millennials and it’s not hard to see why. With the average price of a detached home over $1 million in Toronto and Vancouver and rising, many millennials struggle just to make the minimum 5 per cent down payment. For those millennials who are stretching their debt to the limit by entering the real estate market, a greater understanding of the effects of rising interest rates would be very beneficial. There is also a rising number of senior insolvencies. Better financial literacy could help seniors on fixed incomes better prepare or better understand their debt relief options.
Although the politicians may have missed the boat on discussing financial literacy during the recent election campaign, it’s far from too late. November is Financial Literacy Month in Canada. This is the ideal time for party leaders to shine the light on financial literacy. More financial literate Canadians might mean that less people will need to face the challenges of seeking help with bad debt. If they do need to seek help, they will have a greater understanding of their options. The Financial Consumer Agency of Canada (FCAC) has plenty of helpful financial tools from budgeting calculator to a mortgage qualifier tool to empower Canadians to better get a grasp of their finances.
Do you find it tough to keep up with the rising cost of living without going into debt? Share your thoughts with BDO by joining the conversation on Twitter using #LetsTalkDebt #BDOdebtrelief