How Families can get Help With Their Debt ChallengesOct 21, 2018
The affordability of raising a family has changed, and as Canadians struggle with debt, new issues have been created. Millennials trying to save money to move out are spending more time living at home. Parents trying to save for retirement are held back by late bills and debt payments.
In fact, according to our inaugural Affordability Index, which examines how affordable life is in this country, Canadians with children are far more likely to say their personal debt is overwhelming as compared to those without kids — 34 per cent compared to 20 per cent.
Overall, nearly half of respondents to the survey said that their household income isn’t enough to allow them to live debt-free. This is especially true for parents with adult children living at home, which creates a generational debt — one that’s shared under one roof by parents and kids alike.
For the adult children, it’s hard to afford moving out. Responding to our poll, 41 per cent say it’s too expensive to buy a home and 33 per cent say it’s too expensive to rent. For another 29 per cent, its school and school debt that’s keeping them living at home.
For the parents, that makes it a little harder to afford daily expenses. Nearly one-fifth (18 per cent) of Canadians have a child over 18 living at home. In the Affordability Index, parents felt pressure from all measures — food, housing, transportation, utilities, saving for retirement, and more.
In order to help families with these generational debt challenges, here are three plans of action you can get started on today.
- Review your debt regularly. A piece of advice from Billy Heinsley, president and CEO of the National Endowment for Financial Education (NEFE), is that in these situations it’s critical for families to understand the differences between good and bad debt. While taking out a mortgage is considered good debt — there’s investment in your home’s value — bad debt can lose value quickly. It’s important for families to put emphasis on paying off the bad forms of debt first, rather than making minimum payments.
- Improve your financial literacy. Being overwhelmed by personal debt can be a terrible feeling, but education can be a surprisingly effective remedy. Take some time to learn about debt solutions that exist — such as a consolidation loan or credit counselling. By using an online calculator for consolidation, you can calculate whether a loan will save you money on your monthly payments. Often, a consolidation loan carries a lower combined interest rate than debt like credit cards and lines of credit. By educating yourself, you can find a solution that will relieve financial pressure and make life a bit more affordable.
- Take advantage of a Licensed Insolvency Trustee’s (LIT) services. The process of visiting an LIT can add to this education for families. It starts with a consultation, where the LIT will review your unique situation and explain all options (these can include budgeting strategies or other DIY methods). Then, they can either refer them to professional services like credit counselling or walk you through the steps of a formal solution.
While bankruptcy and a consumer proposal are only for the most severe cases of personal debt, LITs are experienced in explaining these solutions and only suggesting them if they’re needed.
By starting the process of getting help with your debt, families can meet their affordability challenges and create a more positive situation. With adult children living at home and so many factors adding to a family’s bottom line — this can be a great source of stress relief in the short-term too.