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Canadian household debt swells to $1.3 trillion

Canadians are increasingly relying on credit cards and credit lines to finance day-to-day expenditures, and total household debt in Canada reached an all-time high of $1.3 trillion, according to a report released Tuesday.

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Canadians are increasingly relying on credit cards and credit lines to finance day-to-day expenditures, and the total national household debt in Canada has reached an all-time high of $1.3 trillion, according to a report released Tuesday.

The report, authored by the Certified General Accountants Association of Canada (CGA-Canada), bases its findings on a national survey and other economic data.

The survey found that 42 per cent of respondents said their personal debt was rising in the past three years, and 21 per cent said they couldn't manage their debt.

Nevertheless, the report suggests that survey respondents were optimistic in their attitudes toward debt. Seventy-nine per cent reported that they can either manage their current debt levels well or take on more debt.

Some 58 per cent of respondents said that day-to-day living expenses are the main cause for the increasing debt. The same survey conducted in 2007 found that 52 per cent singled out everyday expenditures as the principal cause for rising debt.

Using data from Statistics Canada, the authors found that in 2008, debt made up 19 per cent of Canadian assets on average, and that debt accounted for 23.7 per cent of net worth. The researchers said both numbers were up compared to their averages between 2000 and 2006, when they stood at 15.4 per cent and 18.5 per cent respectively.

The survey interviewed 2,014 people and had a margin of error of 2.2 per cent, 19 times out of 20.

Third of non-retired Canadians report not saving

The study was conducted in November, before Canada slipped into recession, but when numerous warning signs of the impending downturn were becoming increasingly apparent.

"Many Canadians are not aware of how the economic downturn has impacted their financial situation and continue to load up their credit cards and lines of credit, while committing few, or in some cases, no resources to savings," said Anthony Ariganello, president of CGA Canada in a release.

The report finds that 32 per cent of non-retired respondents said they were not devoting any funds toward saving, even for retirement, up from 25 per cent in 2007.

Of those making under $35,000 a year, 49 per cent surveyed reported that their debt levels rose in the last three years. In comparison, 42 per cent of those making $35,000 to $75,000 a year reported their debt levels rose, while 38 per cent of those making over $75,000 annually reported an increase.

"What we've noticed … is that [people are] spending on plasma TVs and simpler things like coffee and candy bars and things of that nature," Rock Lefebvre, vice-president at CGA-Canada, told CBC News.

Lefebvre says that is a huge change from previous generations, where people would generally save up to make a purchase.

"I guess it would be unfair to say it's an era of entitlement, but certainly the availability of credit makes it such that people don't defer purchases," he said.

Credit swells

Bank of Canada data released Friday showed lending by the chartered banks has flagged in the weak economy — except in consumer credit, which continues to swell.

Personal lines of credit expanded to a new high of $181 billion outstanding in April, an increase of 6.2 per cent year-to-date, and up 20.4 per cent from a year earlier. This type of debt has bloated from $100 billion five years ago and less than $50 billion at the start of the decade.

Personal loans from banks totalled $48.5 billion, up 8.1 per cent from a year earlier, and bank credit-card receivables were up 8.9 per cent at $51.5 billion.

CGA-Canada said Tuesday's report indicates a need to improve public education on financial management and the economy at large.

With files from The Canadian Press