The wealth effect means that people who feel they are financial well-off are more likely to spend money.  Those who feel they are financially stretched are more likely to cut-back on their spending.  Note that this is a ‘feeling’ rather than a ‘fact’.  Consumer behaviour follows trends.  Most recently debt has become socially acceptable, even for those nearing retirement.  This is a remarkable shift from perspectives even two decades ago when very few began retirement with any debt.  In fact, delaying retirement until debt was paid off was expected.  In the past no one leveraged credit in their retirement years.  Now it is common for people to incur new mortgages and line of credits in their post-working years. Times certainly have changed!

According to the Vanier Institute (2012)1, insolvency rates for older persons in Canada have increased substantially:



      Insolvency Rate Increase

from 1990 to 2010 (%)





In the U.S., those aged 65 and older experienced a doubling in the bankruptcy rate from 1991 to 20012.  Although it is commonly thought that U.S. bankruptcies are due to medical costs, these senior bankruptcies were more likely to be personal debts and credit card misuse3.   It was determined that individuals were unable to fully understand the financial consequences of credit card interest rates and various financial fees.   Financial control and management is a hallmark of  adult autonomy but so many of us do not do it well.  For those who are older the risks of health issues or increased expenses at a time when incomes are fixed adds to their financial risks.  Older Canadians needs to make financial knowledge a priority in order to remain financially secure.    This includes ensuring day-to-day finances are manageable and long term finances are suitable if health changes arise and when estates are transferred.  Retaining personal autonomy cannot be met if financial health is unprotected.


Footnote #1:  Sauve, R., The Current State of Canadian Family Finances, The Vanier Institute of the Family, March 22, 2012.

Footnote #2:  Davies, L. (2012)  Personal debt and retirement, Progress in Economics Research. Volume 26, Tavidze, A. (Ed.).

Footnote #3:  Pottow, J. A. E., (2011). The rise in elder bankruptcy filings and failure of the U.S. bankruptcy law. Public Law and Legal Theory Working Paper Series. Working Paper No. 210, June 2011.