How to Reduce Your Debt When You’re a ParentOct 14, 2018
Household debt is at a record level — if you keep up with mainstream news, you’ve likely heard that quite a few times in recent months. But what has become increasingly concerning is how that debt is affecting Canadian families on a daily basis.
According to our new Affordability Index poll, average non-mortgage debt for Canadians with children is $20,647. About four-in-10 (42 per cent) of Canadians with kids tell us that affording even essential utilities like heat and water is challenging.
As costs of basic needs like food, utilities and transportation continue to climb, parents often face ongoing affordability challenges. Our Index findings reflect that reality.
Almost half of Canadian parents say that their total household income isn’t enough to let them live debt-free.
That parents may be struggling to reduce debt isn’t necessarily surprising. According to our poll, those Canadians most likely to be raising a family (millennials and Gen Xers) are among those most affected by lack of affordability.
Ongoing debt can mean parents have to put off essential purchases or delay buying a home or vehicle. Long-term goals, such as saving for their kids’ education or their own retirement, are sometimes put on the backburner as well.
83 per cent of Canadians with children say that they’ve had to delay at least one expense in the last two years.
Having multiple and often conflicting financial responsibilities can contribute to affordability challenges. Student loans, consumer debt, unpaid credit card balances, a mortgage and family expenses can all make it difficult to reduce debt.
Knowing how to tackle debt may be part of the problem.
Compared to Canadians with no children, those who have kids are far more likely to admit that they’re overwhelmed by their debt and don’t know what to do.
What can parents do to reduce debt?
- Talk to a Licensed Insolvency Trustee (LIT)
This is a good first step. An LIT will work with you, reviewing your financial situation to help you decide which solutions are best for you. An LIT is obligated to help you understand all of your options, from budgeting to debt management to credit counselling to a consumer proposal or bankruptcy.
- Learn something new
A new debt repayment strategy (like the debt snowball or debt avalanche) may set you up for success. Researching your options and how they work can also help you feel more in control of your situation.
The Financial Consumer Agency of Canada (FCAC) has an entire database dedicated to providing financial literacy resources to all Canadians, no matter their age or experience. The database can help you understand how changing interest rates can affect your debt and your credit, what your rights and responsibilities are with your credit cards and lenders, or how to save for a home.
- Find a budgeting method that works for you
Sticking to a budget is important, but it also takes time. With the demands of everyday life, budgeting can fall to the bottom of your priority list.
Look for resources that fit your lifestyle. Apps like Mint’s mobile budget an financial tracking software are helpful. An online credit card calculator can help you set realistic timeframes for debt reduction, so you aren’t frustrated with the process.
- Get the kids involved
Parents can consider including kids in the process in an age-appropriate manner. A Family Annual Meeting is one way to keep your goals and financial limitations in the open, so the entire family understands why you need to make the choices you do.
Reducing debt takes time, especially when you’re dealing with multiple and sometimes conflicting financial responsibilities. Understanding your options will help you take control of your finances and work towards your personal and family goals.