Homeowners indicate they are more comfortable with debt than their parents were
- Homeowners in their fifties are almost five times as likely to say they are more comfortable with debt than their parents.
- Those whose parents taught them a lot about debt management are twice as likely to report their debt is in good or great shape
- Eight in 10 homeowners indicate being or becoming debt-free among top financial priorities.
- Almost half of homeowners surveyed would consider themselves to be debt-free even if they have mortgage debt outstanding.
Waterloo – Four in 10 homeowners (39 per cent) indicate they're more comfortable with debt compared to their parents, versus just one in eight (13 per cent) who feel they’re less comfortable. The perceived gap in comfort level was greatest among homeowners in their fifties, who were five times more likely to indicate a greater degree of comfort than their parents, compared to those in their twenties and thirties, who were only twice as likely.
The survey suggests that homeowners are also becoming more comfortable discussing debt within the household, with three in 10 (28 per cent) indicating they communicate more than their parents, compared to just eight per cent who feel they communicate less. Once again, homeowners in their fifties were most likely to feel they differ from their parents. This group was five times as likely to feel they’re better communicators than their parents, compared to those in their twenties, who were only slightly more likely.
“Canadians are becoming increasingly comfortable with taking on debt and discussing that debt with those close to them,” says Jason Daly, VP Product, Marketing & Business Development, Manulife Bank of Canada. “This could be a result of our current low interest rate environment, which makes debt management seem less intimidating than it was in the ‘80s and 90’s, when rates were much higher.”
The question of “what is debt?” also appears to be in flux. While almost half (45 per cent) of homeowners surveyed would consider themselves to be debt-free even if they have mortgage debt outstanding, this varies significantly by age group. Fully two thirds of homeowners in their twenties (68 per cent) don’t appear to include their mortgage when they think about their debt, compared to 60 per cent of those in their 30’s, 48 per cent of those in their 40’s and just 29 per cent of those in their 50’s.
“This may reflect a difference in focus,” says Daly. “Younger homeowners are more likely to carry higher-interest consumer debt, which they’d be smart to focus on paying down. However those in their 40s and 50s may have already tackled their consumer debt and are becoming more focused on paying off their mortgage before retirement.”
While many Canadian homeowners may feel that debt is a more normal part of their lives than it was for their parents, 38 per cent feel they will have more difficulty becoming debt-free than their parents, compared to 23 percent who believe it will be easier.
While many of us feel we’re more comfortable holding and discussing debt than our parents, the survey also suggests that our parents have a significant influence on our future success managing debt. In fact, homeowners who indicated their parents taught them a lot about debt management are twice as likely to report being in “great” or “good” shape with regards to their debt (67 per cent) compared to those whose parents didn’t teach them anything about debt management (34 per cent)..
Becoming debt free
Despite sometimes significant generational differences when it comes to debt, one finding that’s consistent across age groups is the desire to become debt-free. Overall nearly 80 per cent of homeowners indicate that being or becoming debt-free is among their top financial priorities – ranging from 75 per cent of those in their 20s to 84 per cent of those in their 50s. And, by and large, homeowners seem to be comfortable with their progress toward this goal, with 86 per cent of respondents who have debt indicating that they are either “doing OK”, “in good shape” or “in great shape”.
The key takeaway from this survey is that, although we tend to share our parent's strong desire to become debt-free, we often have different attitudes, perceptions and preferences when it comes to debt. This highlights the importance of developing a debt-management strategy that's right for us, rather than simply doing what our parents did. "Effective debt management is central to financial health," says Mr. Daly. "However, to be successful, a debt management plan must be tailored to the individual. A financial advisor is in a great position to help you create a plan that not only aligns with your goals and preferences, but also complements and supports your other financial goals."
Advice from fellow homeowners
What were the top tactics homeowners who recently became debt free recommended to others wanting to eliminate their debt? Interestingly, just a third (35 per cent) indicate “always finding the lowest rate” was important. The top suggestions were:
- Paying credit card balances in full (92 per cent)
- Make extra payments on debts (62 per cent)
- Create a written budget to manage spending (51 per cent)
About the Manulife Bank of Canada Debt Survey
The Manulife Bank of Canada poll surveyed 2,374 Canadian homeowners in all provinces between ages 20 to 59 with household income of more than $50,000. The survey was conducted online by Environics Research Group between March 10-24, 2014. National results were weighted by province and gender.
About Manulife Bank
Established in 1993, Manulife Bank was the first federally regulated bank opened by an insurance company in Canada. It is a Schedule l federally chartered bank and a wholly-owned subsidiary of Manulife. As Canada’s first advisor-based bank, it has successfully grown to more than $23 billion in assets and serves clients across Canada.
Manulife is a leading Canada-based financial services group with principal operations in Asia, Canada and the United States. Clients look to Manulife for strong, reliable, trustworthy and forward-thinking solutions for their most significant financial decisions. Our international network of employees, agents and distribution partners offers financial protection and wealth management products and services to millions of clients. We also provide asset management services to institutional customers. Funds under management by Manulife and its subsidiaries were approximately C$635 billion (US$574 billion) as at March 31, 2014. Our group of companies operates as Manulife in Canada and Asia and primarily as John Hancock in the United States.
Manulife Financial Corporation trades as ‘MFC’ on the TSX, NYSE and PSE, and under ‘945’ on the SEHK. Manulife can be found on the Internet at manulife.com