Millennials are the largest generation in Canada. They’re also the most educated and diverse. Millennials may also be the first generation to be financially worse off than their parents.
To get a better understanding of why many members of this generation are struggling with their finances, let’s dig into the topic of debt and whether more millennials are declaring Bankruptcy.
What is the State of Millennial Debt in Canada?
Despite having higher after-tax household incomes and higher assets than young Gen X-ers, millennials hold the largest share of credit debt, accounting for $911 billion of the $2.38 trillion credit market debt. That’s approximately 38% of all debt, according to a recent report by TransUnion.
Data from Statistics Canada reveals that millennials (aged 35 to 44) have a debt-to-income ratio of 264.2% in the first quarter of 2024. In 1999, this number was 125%. This means that after paying taxes, millennials are spending more than double their monthly income on debt repayment.
Millennial Bankruptcy in Canada
Do higher rates of debt mean more millennials declaring Bankruptcy?
Looking at debt on a broader scale, Canada has the highest household debt to disposable income ratio of any G7 country. Meaning, Canadians are spending more than they can afford.
This helps to explain why total consumer insolvencies have risen over the last year (from Q3 2023 to Q3 2024).
In total, Consumer Bankruptcies increased by nearly 12%, and Proposals by over 16%.
Millennials aged 35 to 49 accounted for nearly 38% of all insolvency filings in 2023, the largest share of all age groups.
Why Are Millennials Struggling?
Why is millennial debt on the rise? It turns out there are several factors contributing to the struggle, including:
- Stage of life. Many millennials are in a stage of life where they have higher credit needs and may spend more money on purchasing a home, and caring for children and/or elderly parents.
- Student loans. Tuition has risen three times faster than inflation since 1985, resulting in student debt nearly tripling over the last 30 years.
- Higher cost of living. With high inflation, the cost of living has gone up making it harder for millennials to pay their bills and increasing delinquency rates.2
- High interest rates. Increasing interest rates have driven up the cost of debt making it harder for millennials to make the minimum payments on their credit cards. In times of economic instability, Canadians tend to focus on paying their mortgage, making lower contributions to their non-mortgage debts.
- Home prices. Homeownership is expensive. The average home price in Canada is $669,630. The average median household income in Canada is $70,500, after taxes. First-time buyers now have to save more and for a lot longer.
- Loss of pension plans. Today, fewer employers offer their employees the security of a pension plan, especially in the private sector. This leads to less future security unless you’re saving and investing on your own.
- Inadequate income. Fifty-seven percent of Canadian households say their incomes aren’t keeping up with the current rate of inflation, according to data from TransUnion.
With more bills, a higher cost of living, high interest rates, higher home prices, fewer pension plans, and wages that aren’t keeping up with the pace of inflation, it’s obvious why many millennials are dealing with a personal debt crisis.
Tips for Struggling Young Canadians on How to Avoid Insolvency
If you’re struggling with your finances, know that you’re not alone. Many Canadians are worried about their financial situation. While there are many factors that are outside of your control, there are things you can do to better your finances, including:
- Improve your financial literacy. When it comes to your money, knowledge is power. Check out free online websites and books on personal finance from your local library. Or download a podcast about debt management.
- Create a budget. Before you can take control of your finances, you need to understand how much income you have coming in and how much you’re spending. If you’re spending more than you make, you’ll need to make cuts, increase your income, or both.
- Consider renting instead of buying. While homeownership is a dream for many, it’s expensive. Not only do you need to save up for a downpayment but then there are moving costs, maintenance costs, your mortgage, and insurance. For many, renting provides more flexibility and less financial responsibility.
- Speak to an expert. If you’re struggling with debt and unsure where to turn. Speak to a Licensed Insolvency Trustee about your debt relief options.
Bankruptcy and Other Debt Solutions For Millennials
If you can’t pay your bills on time, a LIT may suggest a Consumer Proposal or Bankruptcy. While these can seem like intimidating options, they offer a great deal of relief from your financial problems. As soon as you file for a Proposal or Bankruptcy your creditor wage garnishment or legal options will stop.
Consumer Proposal
In a Consumer Proposal, you work with your LIT to develop a proposal for your creditors where you offer to pay a percentage of your debt, extend the time you have to pay, or both. If your creditors accept, you have up to five years to complete the proposal.
Personal Bankruptcy
If you file for personal Bankruptcy, your LIT is responsible for selling your non-exempt assets to raise money for your creditors. In exchange, you’re discharged from most of your unsecured debts.
Are Millennials Worse Off Than Their Parents?
Are millennials declaring Bankruptcy at higher rates than other generations? Are they going to be the first generation that’s financially worse off than their parents?
It depends on which headline you read. While millennial wealth is on the rise, it’s the high levels of debt that are holding this generation back. Burdened with credit card debt and student loans, and unable to break into the housing market, it’s a fact that many millennials are indeed struggling.
If you need help with your debt, help is only a phone call away. Contact us at Allan Marshall and Associates today for a free, no-obligation consultation. Call 1-888-371-8900 or fill out our online form.
