Canadians struggling to save and pay off debt; 38 per cent have no savings

[carverman]

If the economy is to continue growing, wages have to keep up with inflation.

But that is not always the case. Gov't can meddle with this by imposing
wage freezes..or like McGinty giving the Ont civil service a 1% wage hiike
over the next 2 years, when the real rate of inflation )(gasoline, heating/
electricity/insurance/food) is closer to 5% annually.

On an inflation adjusted basis, people can buy less goods with their money today than they could 20 years ago.

True is some cases, but not in others. Some consumer goods are actually
cheaper today (made in China) than they were 20 years ago..but items
that are still manufactured in NA will cost more...ie: cars.

Now a hypothetical question ..is that 2011 model of car a better buy
for the current inflated value of the Cdn dollar than it was 20 years ago?
In other words, removing actual depreciation out of the equation,
is the 2011 model you are buying today, the same value (bang for the buck)
than a 1981 comparable model you were buying then?

Take away the opportunity to borrow against future earnings, which is all that debt is, and the economy would have collapsed a long time ago.

Access to credit is what keeps the economy going...while on paper, the
self worth may be more today than 20 years ago..subtract one's debt from
equity,and you arrive at true self worth..which in some cases is negative.

The government knew this, and that is exactly why they lowered barriers to credit.

Government self interest here. In order to bring in tax dollars and stimulate
the economy through consumer purchases (or gov't stimulus spending),
credit has to be readily available..even if borrowed against the future.

Unless wages go up dramatically, there are only two ways it can go.
Personal debt will continue to rise, or spending will stop and the economy will slow down.

The economy goes through cycles of growth and recession. As soon as
interest rates and commodities rise, that puts a damper on consumer
spending and the economy starts to slow down.

The current rise in oil prices (for an oil based economy) will have an
effect within a given time to slow down spending and if prolonged
slowdown in consumer spending occurs, a mini-recession or possibly
a full one can occur.

[HaroldCrump]

Update:
Household debt reaches record $1.5 trillion

According to the Certified General Accountants Association of Canada, Canadian household debt has reached a record $1.5 trillion, and calculates that more than half of indebted Canadians are borrowing just to afford day-to-day living expenses such as food, housing and transportation.

http://www.680news.com/news/national...d-1-5-trillion

There seems to be a suggestion in that news report that somehow the ballooning household debt is influencing the BoC's decision to keep interest rates low, to avoid bankrupcies and ensuing a US-style housing collapse.

Not sure how true that is, if it is, they are simply compounding the problem.
The clear message in this article is that it's ok to have high consumer debt because interest rates are low and the govt. will keep it low for next year or longer.
So it's ok to spend like crazy.

[umpatan]

Most families are stretched to the limit to put anything away in savings accts.
Our parents were still able to do that because even though the wages were
lower in those years, so was the cost of living and generally speaking one
parent stayed home to raise the kids. Today with the increased cost and
taxes heaped on the working poor, that is not as common. Two parents
have to work and the kids are left to their own resources.."latchkey" kids.

I find it amusing that Harper is crowing about increasing the TFSA from 5K
to 10K in...again 4 years time from his re-election. What a joke!
Most families are struggling and dont find enough to put in 5K TFSA,
let alone a 10K!
Is this writing on the wall that universality for government benefits is not
sustainable in the future..and more people are expected to be on their own?

Look what's happening in the CPP changes. Now you can actually OPT OUT!

Harper is raising the TFSA to 10K to help out the rich. See if anyone making $12.00 an hour is able to put anything into a TFSA let alone RRSPs. This TFSA is only another ploy the conservative government is using to bail out the Rich to help weasle out of paying income taxes on their investment portfolios, as they have to keep paying income taxes on the capital gains of their non registered mutual fund accounts. (Keep in mind that you have to save 18% of your gross income plus $5,000 in TFSAs before you even have to worry about having non registered investment accounts). Even those making $45,000 a year would be hard pressed to contribute to a TFSA even if they are single. I would like to see the NDP governemnt scrap the TFSA and just give a cheque to low income Canadians for $500 instead. Worrying about paying income taxes on dividends or capital gains of mutual fund distributions, and worrying about the 200 day moving averages is all a "bourgeois headache" from someone making $12 to 18 an hour.

[Jon_Snow]

This is the first I've heard of this TFSA news. For real?

[Dmoney]

I would like to see the NDP governemnt scrap the TFSA and just give a cheque to low income Canadians for $500 instead.

I'd hate to see the NDP elected because they'd be likely to do just that. How is giving a chunk of the population money going to solve the problem of the government not having enough money?

[HaroldCrump]

This is the first I've heard of this TFSA news. For real?

I believe the proposal was that TFSA contribution limit will be raised to $10K once the deficit is eliminated, expected to be 2015 - 2016.
I don't think it's happening, so no need to hold your breath.

[carverman]

Harper is raising the TFSA to 10K to help out the rich. Worrying about paying income taxes on dividends or capital gains of mutual fund distributions, and worrying about the 200 day moving averages is all a "bourgeois headache" from someone making $12 to 18 an hour.

I make $0 per hour and solely dependent on my gov't
for pension income... and what is left of the underfunded Nortel pension plan.
Now I must admit. that if I take my yearly gross income and divide it by 1924 (yearly) working hours (37 hr
avg work week x 52 weeks... when I worked at Nortel), it would work out to approx $17.67 an hour( in my current retirement income)..and I still manage to pay income taxes, property taxes, HST and save $100 to $300 a month in my TFSA.

[carverman]

I believe the proposal was that TFSA contribution limit will be raised to $10K once the deficit is eliminated, expected to be 2015 - 2016.
I don't think it's happening, so no need to hold your breath.

Not happening in Canada, anytime soon you say?......Pity!

I seriously doubt that with the Harper gov'ts curremt spending agenda..that the deficit will be eliminated in 3-4 years.

It certainly would be nice..but before that date comes around some "creative accounting" could be in the works for a "smoke and mirrors" illusion created by the Harper gov't to hide the fact that the deficit still exists,
and infact may be rising...the superjets, superjails, corporate tax cuts and less jobs available in a economy that is not growing as well as the BOC or the gov't is predicting.

With Auditor General Sheila Fraser gone now, and the guy
that the Harper gov't hired to replace her..well lets say..
if you believe anything they say now..there might be
some "prime development land" in a Florida swamp that
you might be interested in investing in...

[carverman]

Update:
Household debt reaches record $1.5 trillion
So it's ok to spend like crazy.

Consumer spending stimulates the economy, Harold.

If the "younger generation" today, just salted as much as they could in savings,as "our parents", the economy could in fact enter a serious recession and possibly collapse.

Spending, especially piling on the credit card debt, just defers the inevitable..that at some point..the Canadian consumer has to "pay the piper"!

I have only major CC (and a Home Depot cc ...and I only use the H-D card for the 1 year deferred payment deals).
I use my PCMC for all my purchases..including groceries, because I get PCMC points for each dollar I spend with my CC on groceries at Loblaws.

However, it never ceases to amaze me that if one decides to just make the minimum monthly, instead of paying it off at before the due date like I do, it would take many years to pay off roughly $1000.00 at the $20 minimum monthly payment... because of high CC interest and interest compounding.

On my last online MC statement (interest 19.97%) it said that for a balance of $937.xx and the minimum monthly payment of $20.61....

" it will take approximately 18 yrs, and 2 months to repay the amount shown on the statement" ($937.xx)..

..and that is provided, there are no further purchases charged against it.

Imagine how long it would take me, if I ran the card up to my credit limit of $9300?..

Heck, I wouldn't live long enough to pay it back if I paid only the monthly minimum...

[HaroldCrump]

Consumer spending stimulates the economy, Harold.

If the "younger generation" today, just salted as much as they could in savings,as "our parents", the economy could in fact enter a serious recession and possibly collapse.

That is not true.
Our modern bourgeois media and financial industry has sold us on the concept of extreme consumerism.
It is held above our heads like the sword of Damocles...shop till you drop, or else face recession.
And thus we spend like zombies and go deeper and deeper into debt.
Not just individuals, but governments too.
As we can see all around the world - developed, emerging and underdeveloped.

Fact is that savings (individual as well as aggregate) is what fuels capital investment, which in turn, generates future growth.
The capital investments lead to innovation and improvements in the efficiency of factors of production, such as machinery, technology etc.
Aggregate savings are also required to invest in the superstructure of the economy, such as infrastructure, health care, etc.

I just don't buy this whole "shop till you drop or else.." blackmail.