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Canadians display signs of financial prudence during a period of declining wealth

TORONTO: After almost a decade of wealth accumulation, the average Canadian household net worth declined slightly in 2018. While the latest financial snapshot of Canadian households includes some positive trends, growing debts, shrinking pensions and a sharp drop in liquid assets are putting pressure on families.

A new analysis by Environics Analytics found that the average Canadian net worth dropped by $7,594 or 1.1 percent to $678,792 in 2018. Although national real estate values continued their steady march higher, rising by $6,336 or 1.6 percent on the year, these gains were offset by other factors. A significant pullback in the equity market in the final few months of the year contributed to a drop of $10,045 or 3.4 percent in liquid asset values. To compound matters, household debt levels climbed by $3,309 or 2.3 percent, while higher interest rates reduced employer pension plan values by $576 or 0.4 percent.

Despite being relatively prudent in terms of their debt acquisition and repayment in 2018, Canadian households felt the effects of a significant decline in equity market valuations over the fourth quarter of the year, says Peter Miron, Environics Analytics' Senior Vice President, Research and Development and the architect of WealthScapes. On a more positive note, Canadians are actively taking steps to reign in their debts and build up their savings. In fact, four provinces saw the average debt per household decline in 2018.

Apart from the investment losses, rising interest rates during 2018 have been another significant drag on household net worth. In response, Canadians have been trying to blunt the effect of rising rates by converting their variable-rate, non-mortgage debt into locked-in loans.

This financial snapshot of Canadian households emerged from an analysis of WealthScapes 2019, Environics Analytics' authoritative financial database. WealthScapes, which is current to the end of December 2018, provides data on all aspects of household finances, including real estate, employer pension plans, tax-free savings accounts and credit card debt.

Environics Analytics, the Toronto-based marketing and analytical services company, created WealthScapes to help financial institutions, retailers and charities analyze the fiscal profile of current and potential customers, identify promising markets and develop business strategies. WealthScapes is built using sophisticated modelling techniques and aggregated, privacy-compliant, small-area data from a variety of authoritative sources, such as the Bank of Canada, Equifax, Statistics Canada and the Teranet-National Bank House Price Index.

To access a breakdown of regional and provincial trends, as well as a look at some of the trends at a neighbourhood level, please read the complete analysis at environicsanalytics.com/WealthScapes2019.

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Canadians display signs of financial prudence during a period of declining wealth


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