Changing Life Events, Accumulating Debt Put Seniors at Risk for Financial ProblemsNov 20, 2015
2015 has been a year of financial stress for many people. In Canada, high housing prices, low returns on fixed-income investments and job losses in some parts of the country have left many consumers wondering how they’re going to make ends meet this holiday season. In fact, the number of Canadians declaring bankruptcy is on the rise, especially for seniors. In 2014, seniors accounted for 10 per cent of all bankruptcies in Canada, a 20 per cent increase compared to 2010. Unfortunately, seniors don’t realize the root of their financial problems could be a lack of financial literacy.
Financial literacy is a key component toward remaining financially healthy in all stages of life. Yet, many Canadians remain uneducated about their financial situations. The growing need for financial literacy has led the Financial Consumer Agency of Canada (FCAC) to launch a national strategy for financial literacy, which aims in to increase the financial IQ of all Canadians. Increased financial literacy provides consumers with the knowledge they need to make informed decisions about debt repayment. Many Canadians facing repayment challenges could benefit from understanding the difference between bankruptcy and a consumer proposal, or from critically reviewing their budget to determine if it’s realistic or not.
Improving the financial literacy of seniors is a top priority, which is why the FCAC has implemented—as part of its financial literacy initiative—a strategy aimed specifically at educating seniors. Seniors tend to be great at setting a budget and sticking to it; but unexpected life events (such as a change in living accommodations or the death of a spouse), or a desire to help out family members can stretch seniors’ budgets to a point where they can no longer manage their debts. After all the good intentions of supporting family, some seniors might find themselves in need of debt help. Accumulating debt at the later stages of life can pose risks because seniors can find themselves unable to generate the income they need to make their payments, especially with the currently low interest rates on their investments. Tack on the rising costs of healthcare and living expenses, as well as the desire to help loved ones financially, and it’s easy to see why 30 per cent of insolvency cases in Ontario involved people over the age of 50.
With the number of seniors declaring bankruptcy on the rise, financial literacy for seniors is more important than ever. Thankfully, it’s never too late to improve your financial literacy. November marks Financial Literacy Month (FLM) in Canada (#FLM2015), a time where Canadian seniors can take a step back and truly examine their financial situations. Seniors are encouraged to look at their spending, borrowing and lending in 2015 and honestly question their financial standing.
Some questions to ask include: “Do I have enough in emergency savings?” “Am I truthful about my financial standing with my family?” “Are my current debt levels sustainable?” In addition to asking these important financial questions, seniors can use a variety of online tools provided by the FCAC to see how their financial health may be affected by an unexpected life event. Local debt help professionals can also provide support through tools and guidance specific to your needs, such as providing seniors with insight on how their finances would hold up in the case of rising interest rates.
Resources about finances and money management are widespread. As FLM comes into full swing, the FCAC provides online tools and information that can arm consumers with the knowledge they need to take control of their financial lives. Taking the FCAC’s self-assessment quiz is a great first step to recognizing your level of financial literacy and can be a great motivator to learn more. Before committing to long-term debt such as a mortgage, use the mortgage calculator to see if your potential repayment amount fits your lifestyle and finances. For those considering declaring bankruptcy, taking the time to learn about other options, like consumer proposals or consolidation loans, could help you in regaining financial control. Make this November memorable by becoming well-informed about your own financial life.
How did you do on the financial literacy quiz? Join the conversation on Twitter using the hashtags #BDOdebtrelief #CountMeInCA