Canadian families are increasingly using credit to cover day-to-day living expenses, pushing national household debt to $1.3-trillion, according to the Certified General Accountants Association of Canada.
CGA-Canada warned Tuesday that many individuals are unaware of how the economic downturn has hit their financial situation, and they continue to load up their credit cards and lines of credit while skimping on savings.
According to the association's report, a consumer survey in November indicated 85 per cent of households had outstanding debt on a credit card.
And 21 per cent of Canadians who were in debt said they could no longer manage their debt load.
"Household debt has increased significantly over recent years, jeopardizing the financial security of Canadian households," said Anthony Ariganello, president of CGA-Canada.
Forty-nine per cent of families with children under 18 said their debt had increased in the past three years, according to the online survey of 2,014 households, which claims a 95 per cent likelihood of being accurate within 2.2 percentage points.
Lines of credit and credit cards account for the largest proportion of consumer debt, and the report says the escalation of debt "is primarily caused by consumption motives rather than asset accumulation."
One-quarter of those interviewed would not be able to handle an unforeseen expense of $5,000, and one in 10 would have trouble with an unforeseen cost of $500.
The report says Canadian personal indebtedness "is a highly disturbing matter" and prospects are low for improving household financial security.
"Although CGA-Canada recognizes the importance of consumer spending for business development and for economic growth, a balanced approach to spending, saving and paying down debt is a more desirable option than trying to promote consumer spending as a solution for the current economic downturn," the association says.
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.Report Typo/Error