IN THE SEASON OF SPENDING, SENIORS NEED TO WATCH THEIR WALLETS
Canadians now owe a record $ 1.513 trillion as we approach the holidays — the season of spending. According to a new report from Equifax Canada, we each owe an average of $ 20,891, an increase of 2.7% from last year.
Seniors 65 and older, however, saw their debt load jump 6.8% to $ 13,380.
“Their debt is one of the lowest but their debt has been increasing faster than other segments,” says Regina Malina, Equifax’s senior director of decision insights.
Seniors, who make up the fastest growing age group, are also one of the fastest growing indebted segments. With many living on fixed incomes and shouldering burdens such as unexpected medical expenses or caring for adult children and/ or aging parents, overspending during the holidays can put seniors at financial risk.
A study for the Financial Consumer Agency of Canada this year revealed that seniors are carrying more debt into retirement and increasingly declaring bankruptcy.
Blake Elyea, a senior vicepresident at Grant Thornton’s consumer insolvency team in Vancouver, says he sees a growing number of seniors as clients; those 65 and older made up 9.5% of all insolvency filings in 2013 ( up from 9.2% in 2012 and 9.1% in 2011), according to Industry Canada.
“The common thing that I see is either poor planning or no planning for retirement and maintaining your pre- retirement lifestyle. Then when your income changes, the shortfall is being backstopped with credit cards and a line of credit,” Mr. Elyea says.
Health issues that cause early retirement or the death of a spouse can also shake someone’s financial stability, he adds.
Perhaps wisely then, Canadians aged 55 and older say they will be spending less this year on holiday expenses ( gifts, décor and entertainment) compared to last year ($ 1,199.20, down from $ 1,422.20), an RBC survey revealed. But more will be using their credit cards with the intention of paying off the balance ( 41% versus 34%).
Mr. Elyea says retirees and their loved ones should have a “gentle” and open discussion about gift- giving, celebrations and retirement’s financial impact.
“It’s a proud generation. If they have children and grandchildren, obviously they want to give because they’ve done so in the past,” he says. “It may be a difficult conversation to have; [ but] there are alternative options to gift- giving that can make a measurable impact.”