Mad money – financial habits that can hurt you

Some Canadians may learn the hard way just how painful their bad financial habits can be.

Interest rates are low now, but if – and some say when – they begin to rise, look out.

According to BMO’s Annual Debt Report, almost two-thirds of Canadians with debt (64 per cent) would be stressed in the event interest rates rose two percentage points, and one-quarter (25 per cent) say they would be very stressed.

That’s because many are amassing debt faster than recent years. The average household debt in Canada is $92,699, trending slightly above the four-year average of $88,303 dating back to 2012 when the annual polling began, BMO says.


  • While 46 per cent of Canadians feel some stress about their current debt load, the percentage is lower compared with the past two years (54 per cent in 2014, and 57 per cent in 2013).
  • 59 per cent believe they will pay off their current debt in five years or less
  • 46 per cent of those with debt plan to take on more debt in the coming year

“The sizeable number of indebted households that would feel very strained by a relatively moderate increase in interest rates is concerning,” says Sal Guatieri, senior economist, BMO Capital Markets. “This is a worrisome side effect of a prolonged period of low interest rates and needs to be closely monitored, especially if rates continue to fall.”

“Interest rates have been hovering around historic lows over the past few years, so many Canadians may have become more comfortable over time with managing their debt,” says Christine Canning, head of everyday banking, BMO Bank of Montreal. “That said, rates will inevitably rise to normal levels, so it’s becoming increasingly important that Canadians stress-test their ability to afford the debt they currently have so they can effectively manage their finances in a higher rate environment.”


Choose a shorter amortization: Keep your amortization period short – the shorter the borrowing period, the less you’ll pay. For more help, click here.

Do your homework: Research to find the best rates on products such as mortgages and secured lines of credit to ensure you keep costs as low as possible.

Build a realistic budget: A detailed budget that incorporates everyday expenses and debt repayment will help provide a clear picture of your financial standing.

Manage credit card debt: Pay down credit cards, beginning with those that carry the highest interest rate, and consider using a low rate card for purchases.


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