The Reasons Behind Young People Falling into Debt Traps and Strategies to Break Free
Many younger Canadians are facing ballooning debt due to inflation, housing costs, and interest rates.
Scott Terrio, the manager of consumer insolvency, has noticed a concerning trend. While the average credit card balance in Canada is less than $4,500, the cases he saw last year averaged over $12,000 for this young demographic.
Mr. Terrio works at Hoyes, Michalos Licensed Insolvency Trustees, helping clients negotiate deals with creditors to avoid bankruptcies. He shared that in 2023, the average credit card debt for clients aged 18 to 29 in Ontario had surged by 34.5% from the previous year.
Jeffrey Schwartz, the executive director of Consolidated Credit Counseling Services of Canada Inc., has observed a similar uptick in debt among their clientele. The organization typically focuses on education and debt restructuring but sometimes refers clients to insolvency firms in severe situations.
Mr. Terrio and Mr. Schwartz both emphasize the need for financial literacy and responsible spending habits, especially among younger individuals facing increasing debt loads. They urge individuals to track their spending, build emergency funds, and avoid excessive lifestyle inflation.
To tackle debt successfully, Mr. Terrio advises living within one’s means, creating a strict budget, and making significant payments towards debt repayment. He warns against high-interest loans and excessive credit card use to prevent falling into a cycle of debt.
Ultimately, the goal is to achieve financial freedom by managing debt effectively and avoiding unnecessary spending. By taking control of their finances, individuals can secure a stable financial future and avoid the pitfalls of overwhelming debt.
