How much debt is normal in Canada? We break it down by age - MoneySense (2024)

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Debt seems to be a normal thing for Canadians these days. After a brief decline during the pandemic, the Canadian household debt-to-income ratio soared to 184.5% in the first quarter of 2023. That means Canadians owe nearly $1.85 for every dollar of disposable income. And an RBC poll found that the Canadians between the ages of 35 and 44 carrying debt had a total debt-to-disposable income ratio of 250% in 2019. And indebted Canadian millennials (under age 35) had debt loads worth 165% of their disposable income.

The ballooning debt has been mainly driven by rising mortgage balances as demand pushed home prices to record levels across the country.

Does this mean the average Canadian is up to their eyeballs in debt? Not necessarily.

What is the average debt for Canadians?

Let’s start by looking at the average consumer balance held across different credit products. This information comes from TransUnion’s Q1 2023 Credit Industry Insights report.

Note, the numbers here represent the average consumer that carries a balance in these categories. For example, many people don’t carry a credit card balance but, for those who do, their average balance is $3,909. And then when you look at average owed on mortgages and compare it to the benchmark price of a house in Canada at $717,000, you see that the average mortgage debt is about half of a typical home’s sale value. (The mortgage debt and home benchmark prices are not from the same source, but you get the picture.)

How much debt is normal for your age?

As a fee-for-service planner, I work with clients at every age and stage of life, from Gen Z to baby boomers. While it’s true that no one individual represents an average, I do see themes around the type and amount of debt that each generation carries.

I’ll contrast that with data from a recent Globe & Mail survey on average household debt by generation.

In general, younger Canadians tend to be more heavily indebted, with overall household debt peaking in their 40s before declining sharply into their 50s and beyond.

Indeed, it would not be uncommon to see a debt-to-household income ratio of 400% (or $4 owing for every $1 in disposable income) for a 26-year-old couple earning a combined $125,000 after-taxes who bought a house and carry a $500,000 mortgage.

On the flip side, a 58-year-old couple with a combined after-tax income of $250,000 who have an outstanding mortgage balance of just $50,000 have a debt-to-household income ratio of just 20% (or $0.20 owing for every $1 in disposable income).

Let’s dive into the age groups and the sources of debt for each.

Typical debt for 18- to 29-year-old Canadians

Gen Z is most likely to carry student loans and credit card balances, but older Gen Z and young Millennials are also dipping their toes into the housing market and taking on big mortgages as first-time buyers.

According to the survey, just over 28% of respondents in this age category had a mortgage and, of those, the average balanced owed was $475,318.

Of the respondents in this age category who carry credit card debt, the average balance was about $4,500.

Finally, 20-somethings who owed money on a home equity line of credit (HELOC) had an average balance of just over $55,000.

Typical debt for 30- to 39-year-old Canadians

The 30-somethings I work with are likely to have a mortgage from a recent house purchase, along with debt from a line of credit and an auto loan (or two).

Respondents of the survey in this age category had a total debt load of about $644,000 between mortgages, HELOCs, credit cards and student loans.

Mortgages were the largest debt culprit, with an average mortgage balance of just over $500,000 for those in their 30s. Of note, 71% of 30- to 39-year-old respondents had a mortgage balance.

Thirty-somethings who carry a credit card balance on average owed about $6,200 on their cards.

Typical debt for 40- to 49-year-old Canadians

Forty-somethings tend to have large mortgage balances and lines of credit, but they also have a lot going for them: They have higher incomes and have moved beyond the expensive child-care years (on average).

Survey respondents in this age category were the most heavily indebted, with nearly $648,000 in total debt.

HELOCs played a big role, with the average balance exceeding $102,000 for those who have drawn on their lines of credit.

Typical debt for 50- to 59-year-old Canadians

Your 50s are a time to rapidly pay down debt and ramp up savings for retirement. Indeed, most 50-somethings I work with have established good savings habits and built up their retirement accounts while paying down their mortgage balance.

The survey found that the average 50- to 59-year-old who carries a mortgage owed about $367,000, while total debt was about $566,000.

Typical debt for 60 to 69-year-old Canadians

Most people should strive to be mortgage free in retirement, but it’s becoming more common for retirees to carry a mortgage balance.

Indeed, the 60-somethings surveyed who still had a mortgage owed about $256,000, while their total debt load was still about $436,000.

Typical debt for 70+-year-old Canadians

Even Canadians aged 70 and older are carrying mortgage and line of credit debt. Of the 70-year-olds who responded to the survey, 11% still carried a mortgage balance and that average balance was still about $217,500.

Furthermore, 15% of those aged 70 and up carried a HELOC, with an average balance exceeding $124,000.

Debt in your 70s may be explained by the fact that retirees want to remain in their homes as long as possible. So, they are accessing funds through a line of credit or reverse mortgage may allow retirees to stay in their homes and enjoy a preferred standard of living.

How to get out of debt

Debt is on Canadians’ minds, but so is getting out of debt. A 2023 BDO survey shows: 56% of Canadians polled plan to cut back on non-essential spends (vacations, eating) to pay debt, 43% to hold back on essential spends (cloths, food, utilities), 26% to work more and 30% are overwhelmed and don’t know what to do.

But, ideally, Canadians will reach their peak debt years in their 30s when competing financial priorities are at their highest.

Prioritize getting out of debt by tackling the highest interest rate balances first to get the biggest bang for your buck—this is called the avalanche method. That means treating credit card debt and other high interest consumer loan debt like a “hair-on-fire” emergency and paying it off quickly.

After making a solemn vow to never pay another cent of credit card debt again, focus on lower interest debt such as your line of credit and mortgage.

HELOCs are insidious because they don’t require more than interest-only payments, so it’s easy to let the balance ride while paying the minimum. Resist the temptation and build a debt payoff plan that rids you of the HELOC balance within a reasonable three- to five-year time frame.

As for your mortgage, it’s fine to prioritize other financial goals like saving and investing at the expense of paying off your mortgage early. The goal for many Canadians is to at least align your mortgage amortization schedule with your retirement date—ideally a few years before to give you options to retire earlier or to catch up on retirement savings.

So, now, what about your own debt?

Remember, debt is a normal part of life for most Canadians—particularly those located in high cost of living areas of the country.

But no one is an average, so you may have higher than average debt-to-household-income in your 20s and 30s, average debt-to-household-income in your 40s and 50s and be debt free in your 60s and beyond.

The key is not to overextend yourself trying to prioritize everything at once. Avoid lingering credit card debt by paying off your balance every month, pay off lines of credit in a reasonable time frame, and align your mortgage pay-off date with your retirement date to ensure you can retire comfortably—and debt-free.

Read more on debt:

• How to calculate your debt
• How to consolidate debt in Canada
• What happens to your debt when you die
• 10 ways to save more and pay down your debt