Spendthrift Nation

Are we doomed to be a nation of divorced, penniless seniors?

Indebted, and at odds over spending habits, Canadians maintain an optimistic outlook on their personal finances. What gives? According to a recent survey sponsored by Investors Group, we Canadians think of ourselves as calm, optimistic stock market investors. 55% of us believe we are better off than our parents. However, we're also much happier to go into debt, and, as couples, we bicker constantly about money.

What is this, misplaced optimism? Are we doomed to be a nation of divorced, penniless seniors? Dianne Ammeter, VP of Advanced Financial Planning at Investors Group, won't go that far. She warns “money issues are often cited as root causes of marriage or relationship breakdown,” noting that 25% of adults describe their disagreements about finances with their partners as “severe.” Particularly infuriating: spending habits. (Spats about vehicle purchases and vacations are the most common.)

Nevertheless, Ammeter also notes that an increasing number of Canadians are engaging in frank, open discussion about their finances. Only 9% of Canadians say big financial decisions are made by one member of the household today, compared to 23% of Canadians who say that's how decisions were made in their parents' home. “We appear to be more consultative and open to communication with our partner about big financial decisions,” says Ammeter. “I think that's a really good sign.”

As for the willingness to take on debt, Ammeter is concerned about household balance sheets, especially if interest rates go up. But she argues it is worth it to go into debt for major financial investments such as purchasing a home. She suggests people only require financial advice on debt “if they are consistently outspending their earnings on an annual basis.”

Canadian household debt grew more quickly then income over the past 14 years. But household net worth grew at an even faster pace, thanks to real estate and equity investments. Given that, Canadians might just be entitled to their rosy outlook.