Whenever new statistics come out, there seems to be the desire to want to compare ourselves to them. How are we doing when compared to the new benchmark. But does it really matter how we compare to the average Canadian net worth by age? I don’t think so. Let me explain why.
How is the Average Canadian Net Worth Calculated?
Not to overwhelm you with too much math, here are the basics of how to calculate an average. First, you add all of the values together and then divide that number by the number of values. An easy example would be the average of 4, 5, 6. The answer is 5 (4+5+6=15, 15/3=5).
But the thing with averages is that outliers can greatly impact the calculated average. Thinking about net worths, for example, if you had 2 people, one with a net worth of $0 and the other with a net worth of $1 million, their average net worth would be $500,000. Doesn’t really seem realistic when comparing the two, does it?
The more values you include in the calculation of an average the more “realistic” the average is.
Relevant Post – FMS – Part 1 – Net Worth Statement
Now that you know how an average is calculated let’s talk briefly about how to calculate your net worth. It can be very simple. Add up all your assets (anything worth value) and subtract all your liabilities (debts). The answer is your net worth. For more guidance see this post on net worth statements. And as always if you have any questions feel free to comment below.
It is difficult to find reliable data on the average Canadian net worth by age because so many organizations include different assets and debts in their net worth calculations. And few will tell you the sample size that they are using for the calculation.
The numbers listed below are from Statistics Canada (a trusted source), but they include households with certain assets and liabilities (debts). So if your household does not have the listed assets or liabilities, it stands to reason that your numbers would not be included.
But the purpose of this post is to explain why it’s not relevant to compare yourself to an average. So we can work with the numbers below for this explanation.
What is the Average Canadian Net Worth By Age?
Now that you know how the average Canadian net worth is calculated, here is the breakdown by age.
|35 – 44 Years||$691,400||$222,500||$499,500|
|45 – 54 Years||$1,137,000||$233,200||$946,900|
|55 – 64 Years||$1,204,300||$140,400||$1,103,400|
The Problems with Comparing Yourself to the Average
The first issue is the accuracy of the comparison. Are you truly comparing apples to apples when comparing your net worth to the average Canadian net worth by age?
If you do not know what is included in the average calculation this becomes difficult. Including, or not including your principal residence can have a significant impact on your net worth. This is especially true for residents of Vancouver or Toronto where real estate has exploded as of late.
There are also psychological issues with comparing yourself to the average Canadian net worth by age. And as we know, there is more to money than just numbers.
If Above the Average Canadian Net Worth by Age
If your calculated net worth is above the average, you may have an overinflated sense of pride. This may or may not be justified.
And if you are above the average, so what?
What exactly does that mean?
Are you a better person for it?
You are the same person you were before you calculated your net worth and compared it to the average.
A number doesn’t change anything.
A net worth calculation is a snapshot in time. It doesn’t predict future behaviour. You could be above average today and gamble it all away and be below average tomorrow.
And statistically speaking (don’t worry we aren’t getting into too much math here), for every person above the average Canadian net worth by age, there is also someone below it.
Don’t let being “above average” go to your head. Really it doesn’t mean that much and should really not carry any personal significance for you.
If Below the Average Canadian Net Worth by Age
If being above average isn’t really that big of a deal, neither is being below average.
Just hearing or realizing that your net worth is below the average Canadian net worth by age may make you feel embarrassed or full of shame. But that’s the thing with averages, not everyone can be at or above them.
And who really cares?
Your net worth is personal and doesn’t change the person you are, regardless of the “average.”
One of the issues with personal finance is the comparison nature that some people feel. You can be a good, scratch that, great person, and still be below the average Canadian net worth by age. (And the opposite is also true). Don’t let a number affect how you feel and who you are.
Your net worth is just a number, regardless of any average, it is no indication of personal character.
What To Do Instead?
So if it’s pointless to compare yourself to the average Canadian net worth by age, what can you do to track your progress?
That’s simple, calculate your net worth. Decide what to specifically include in that calculation and always use the same calculation.
Then as you progress, recalculate your net worth to see how you’re doing. Really, it doesn’t matter what the number is right now.
You don’t get a gold star or a trophy once you hit a certain number.
What matters is that you are making progress in a positive direction. So if your net worth is currently -$100,000 and a year from now it’s -$95,000 you’re moving in the right direction. Keep making small gains, all those little steps add up over time.
“Most people overestimate what they can do in one year and underestimate what they can do in ten years.”Bill Gates
And at the end of the day, remember that your net worth is just a number and one personal finance calculation you can use. It isn’t the be-all-end-all. There is no emotion or judgement with it, it’s just a number, just like 8, 792, or 1,045,789 is.
Sometimes it’s too easy to get caught up in FOMO or wanting to keep up with the Joneses (or the average Canadian net worth by age). But statistics and numbers never really tell the full story of something.
Don’t worry about the average Canadian net worth by age – in the end it really doesn’t matter. Focus on your financial journey and the progress that you are making and the rest will take care of itself.