Albertans Optimistic About Debt Except When It Comes To Unexpected Expenses

According to an Ipsos survey conducted on behalf of MNP LTD., the majority of Albertans feel they can cover next year’s living expenses without incurring more, despite concern about mounting consumer debt in Canada. 57% said they won’t need to take on more debt next year for basic household costs, while the rest anticipate that some increase in personal debt will be unavoidable.

The survey found that confidence is lacking when it comes to the prospect of coping with unexpected expenses. Only a minority of Albertans are confident that they wouldn’t incur more debt if faced with a change in their relationship status like a divorce (26%), unexpected auto repairs or purchase (28%), having to take three months off work due to illness (23%), a job loss or wage decrease (18%), a death in the family (22%), or paying for someone’s education (21%).

The results show Albertans aren’t prepared to cope with an emergency life event. It’s likely that the downturn depleted families’ savings, and many haven’t been able to rebuild that yet. An unexpected expense could cause them to overextend even further and why MNP recommends having between three to six months of expenses saved.

Over forty per cent of Albertans (41%) are concerned that they or someone in their household could lose their job: the highest proportion comparted to other provinces. With so many families already in the red, unexpected life events like a job loss can throw household finances into a tailspin.

These kinds of unexpected life expenses are often considered to be catalysts for bankruptcy. With no dedicated emergency savings, a family can end up draining their bank account to cover an unanticipated expense. This leaves little to nothing left over to pay other debts and basic living expenses. If they remain unable to cover their debts, they could be looking at the possibility of filing for bankruptcy or a consumer proposal.

Far too many people think an emergency savings plan is a ‘nice to have’, and not a necessity. But unexpected home and car repairs, time off work due to layoffs or family emergencies happen to virtually everyone at some point in life. A rainy day fund will help prepare for the inevitable.  

Despite Albertans’ apprehension about 'rainy-day' scenarios, most are broadly optimistic about how their debts have evolved over time and the future direction they’re likely to take. Nearly one quarter of Albertans (23%) think their debt situation has gotten better rather than worse compared to five years ago, while more than half (56%) say it’s about the same. Moreover, half (52%) expect their debt situation to be improved five years from now, making Albertans more optimistic compared to the rest of the country. When it comes to their retirement years, more than half (54%) agree they’re confident that they will be debt-free.

Other poll highlights include:

• Men and Baby Boomers are more likely to be confident about coping with unexpected life changes without increasing their debt, while women and younger Canadians are less confident.
• Compared to other provinces, Quebecers (33%) are disproportionately confident in their ability to cope while maintaining a stable debt load - particularly when it comes to paying for their education, or someone else’s. One in four Ontarians (24%), and two in ten residents of Alberta (21%), Saskatchewan and Manitoba (21%), Atlantic Canada (20%), and BC (19%) feel confident.
• Men (58%) are more likely than women (53%) to agree they’ll be able to cover all living expenses in the next year without incurring further debt – Boomers (63%) are more likely than Gen Xers (51%) or Millennials (49%) to feel the same.
• Men (57%) are significantly more likely than women (47%) to be confident they won’t have any debt in retirement. Millennials (57%) are the most confident about clearing their debt load by the time they reach retirement age, compared to 50% of Boomers and 49% of Gen Xers.
• Millennials (39%) and Gen X Canadians (38%) are significantly more worried than Boomers (18%) about a potential job loss in the household.
• Compared to five years ago, Quebecers are most likely to say their debt situation has gotten better (39%), followed by residents of BC (33%), Saskatchewan and Manitoba (33%), Ontario (31%), Atlantic Canada (28%) and Alberta (23%).
• Five years from now, half of Albertans (52%) say their expected debt situation will be better, as do 49% of Quebecers, 47% of Ontarians, 47% of Saskatchewan and Manitoba residents, 46% of British Columbians, and 45% of Atlantic Canadians.

About the Survey