Andrew Russell
Biz/Tech Reporter

The household debt to income ratio is on the rise in Canada, said financial experts.

Bank of Canada president Mark Carney has warned that the percentage of household debt to income reached an all-time high of 153 per cent in the third quarter of 2011.

“What Carney is talking about is that [Canadians] have to stop being such over-the-top consumers,” said Brian Quinlan, an accountant with Campbell Lawless LLP in Toronto.

Quinlan said it’s important to distinguish between the different kinds of debt, such as student loans and high-interest credit cards.

“Consumer debt, spending money on things like big screen TVs, cars and electronics, is the biggest problem,” Quinlan said.

Low interest rates have made it possible for Canadians to live beyond what they can afford.

“People used to save up before going on vacation or buying that new SUV.  Now the attitude is to spend now and pay for it later,” said Quinlan.

The Bank of Canada warns that when interest rates rise, debt repayment can be a difficult hurdle.

“The best way to start is with a budget,” said Julie Hauser, communications manager for the Financial Consumer Agency of Canada (FCAC) in Ottawa. “A budget is part of what we call a reality check that helps [students] look at the bottom line – what they owe, how much they have coming in, and how interest is applied.”

The FCAC offers an online resource called financial basics, to help post-secondary students with their finances.

A 2011 press release from the College Student Alliance said student debt is over $13,000 for nearly half of college students, and the average undergraduate university debt exceeds $26,000.

“It’s never too early to start talking to a financial planner,” said Humber financial aid officer Daniel Castillo-Sanchez.

“We try to talk to students early about life after school. It can take months for students to find employment [after graduation] and start repaying their loans,” said Castillo-Sanchez.

The Humber Students’ Federation offers one-on-one consultations to help students with money management problems ranging from monthly budgeting to OSAP repayment.

“Most students don’t know where their money is going,” said Frank Rizzi, HSF financial director. “Things like housing and transportation are usually fixed. The biggest problem for students is the entertainment budget.”

Students who are heavily indebted usually have two thoughts, said Rizzi – the question of how long it will take to pay off or whether they should claim bankruptcy. For people choosing the latter, it’s important to remember that even bankruptcy does not absolve a person from repaying their student loans.