In Canada, debt is a problem for a lot of people. In fact, according to the Credit Counselling Society, more than 40% of Canadians have experienced an increase in debt in the past year, and 82% of Canadians say higher prices for daily essentials are the main reason behind their worsening financial situation.
In 2022, a quarter of Canadians said they took on more debt, according to CIBC’s annual financial priorities poll. The reasons are wide ranging, with soaring inflation and rising interest rates causing a considerable rise in the cost of living for just about everyone.
But debt isn’t just an economic or financial problem; it’s a social one as well, according to a new study by Ivey Business School associate professor Dr. Miranda Goode.
“Debtors who anticipate stigmatization perform a variety of concealment behaviours (secrecy, social spending, and help avoidance) that hinder debt reduction,” Goode explained when the study was released.
Her study, “Helping Those That Hide: Anticipated Stigmatization Drives Concealment and a Destructive Cycle of Debt” found that people who are worried about stigma are more likely to hide their debt, spend more on items that bolster an appearance of wealth, and remain in debt for longer as a result.
People who do not have a peer-support group that destigmatizes debt, it finds, have a harder time getting out of the debt cycle.
“There (are) people who are really anxious about what others will think, and that influences how transparent they are and how far they’ll go to keep it a secret,” she says.
From the participants in her study, which is the first study to link the social benefits of a peer group to behavioural change for debt reduction and debt repayment, one in five worried “moderately to extensively” about being stigmatized.
The consumer debt report by Credit Counselling Society also supports these findings, noting that 38% of Canadians surveyed feel embarrassed about reaching out for financial help. This feeling is generally worse among those Canadians with the highest debt loads.
The Ivey study looks at middle-class consumers, with an average of $36,000 of non-mortgage debt (including credit card debt), who attended financial education seminars either in private online sessions, or in a community setting with other indebted individuals. A third group with the same amount of debt that was not offered financial education or a support group functioned as the control group.
Those in the community classes paid off $4,370 more than those in the control group. Comparatively, people in the private session group only paid approximately $3,500 more than those in the control group.
In all, the study found that being honest about debt and having a strong, peer-supported debt-counselling group goes a long way to making Canadians feel like they can manage, and reduce their debt.