The question occurred to me recently: Are Canadians smarter than Americans about matters of personal finance? The answer is the jury is out. Or maybe I should say the jury hasn’t shown up. There’s not much source material offering specifics about the subject. I could find no studies into it, though I admit my research time is limited. Still, through general comparisons between the two countries, a picture takes shape that offers something of an answer, and it’s not surprising. Although the moose and the eagle are different species, they share the same basic animal instincts.
Consider Canadians these days, who are demonstrating the same pattern of behaviour of Americans in the years leading up to the 2008 economic crash in America.
Consider Canadians these days, who are demonstrating the same pattern of behaviour of Americans in the years leading up to the 2008 economic crash in the United States. That involved rampant consumer spending and an enormous real-estate bubble that was bound to pop thanks to too many people spending money they didn’t have on homes they couldn’t afford. Now Canadians are following a similar path through frenzied consumer spending and outlays for jumbo mortgages. There’s no end in sight except perhaps another great big pop when Canada’s real estate bubble corrects itself through what experts say could be at least a 30 per cent drop in property values. Should this come to be, a lot of folks will likely be scrambling for help through credit counselling and debt consolidation services.
These days in this blog I keep hammering on a point, but it needs hammering: We Canadians are not being smart enough about our spending and saving in an era of economic uncertainly. Canada’s household debt to income ratio has reached an unprecedented high of 163.3, meaning that for every dollar earned, Canadians owe a dollar sixty-three. The figure hovers near the level of household debt in the United States at the time of the 2008 crash. Under the circumstances, I have to wonder how much more protection the moose’s fur offers over the eagle’s feathers in the event of an economic storm.
Debt problems that might be manageable in America could create havoc in households here at home, with calls for relief through debt consolidation.
Let’s consider just how smart we are as Canadians following in America’s footsteps. Americans are richer than us. They’ve always been richer than us. Which means they can take bigger blows financially. Debt problems that might be manageable in America could create havoc in households here at home, with calls for relief through debt consolidation. Analysis by TD Bank in 2014 reveals that – using measures in U.S. funds – average annual disposable income in Canada was $26,888, while in America it was $35,950. On average, top earners in America made more than $369,000 compared to $191,000 in Canada.
Now, it’s true that with more in the bank, Americans also spend more than Canadians do – but not much more. TD analysis shows that, on a per capita basis, U.S. consumers spend an average of $17,900 per year in retail outlets, as opposed to Canadians who spend on average of $17,000. Here, though, we need reminding that added fiscal perks are enjoyed by our American friends. They get more bang for their consumer buck than we do. “Adjusting for price and exchange rate differences, Canadians would have to spend an extra US$4,000 per year to purchase the same amount as an average American,” TD reports.
So what’s the final verdict on who’s smarter? Well, I’d say the moose would be wise to stay grounded, rather than trying to fly high. In the process, he just might claim an edge over the eagle.