Canadians piled on more debt during COVID-19, see quality of life worsen: survey

Click to play video: 'Money Matters: Paying off credit card debt faster'
Money Matters: Paying off credit card debt faster
WATCH: How to pay off credit card debt faster – Oct 5, 2021

Debt-ridden Canadians are seeing their quality of life diminish even further as the COVID-19 pandemic drags on, a new survey suggests.

The 2021 BDO Affordability Index released Monday shows 43 per cent of Canadians added to their existing debt thanks to the pandemic. That’s up four per cent from the year before.

One quarter (26 per cent) of Canadians have added at least one new type of debt, and 70 per cent of them say this new debt is making their quality of life even worse.

Jennifer McCracken, senior manager and licensed insolvency trustee with BDO Debt Solutions, told Global News that inflation is impacting debt-ridden Canadians ability to save.

Story continues below advertisement

“It’s really demonstrating that there are difficulties for a lot of Canadians as a result of the pandemic, and as a result of the debt levels that they’re carrying,” she said.

The fourth-annual BDO Affordability Index, which was done in partnership with Angus Reid Group, surveyed just over 2,000 Canadians in early September. The survey is reliable to within plus or minus 2.2 per cent, 19 times out of 20, had all Canadians been polled.

Click to play video: 'Price hikes making Canadians wary'
Price hikes making Canadians wary

Forty-two per cent of Canadians said they’re saving less or not at all during the pandemic, with 57 per cent saying it’s because of increased spending on essentials like groceries and housing. That’s up 13 per cent from last year.

To manage debt, 64 per cent of respondents reduced non-essential spending, 47 per cent reworked their budgets and 30 per cent sold off their possessions. Twenty-four per cent of Canadians applied for government benefits to reduce debt, 18 per cent started a new job and 17 per cent added a second job or a side gig.

Story continues below advertisement

Those more likely to indicate they are saving less or not at all include women, Canadians ages 35 to 54 and Atlantic Canadians. However, three-in-10 respondents said they were saving more, and that demographic included Canadians making $100,000 or more, British Columbians and those with a university education.

“The fact the survey is reporting that Canadians have a lack of savings and that they’re carrying very high levels of debt, Canadians will continue to struggle in a scenario like that,” McCracken said.

“It’s very difficult to continue to put food on the table and save for retirement and meet all of these line items in your budget when you’re struggling.”

‘Critical’ pandemic supports

Throughout the pandemic, those who used government benefits relied on them heavily, the survey indicates.

Story continues below advertisement

Three-in-10 Canadians (29 per cent) accessed some form of government support, and 76 per cent of them described them as very important or essential to maintain their quality of life.

Click to play video: 'Federal aid for small businesses set to run out'
Federal aid for small businesses set to run out

Those figures are concerning for Neil Hetherington, CEO of the Daily Bread Food Bank in Toronto. With prices rising along with inflation in Canada, Hetherington fears Canadians who depend on those supports will struggle if they expire soon.

Financial news and insights delivered to your email every Saturday.

Inflation has been felt in Canada and many other countries as the world economy slowly tries to recover from the COVID-19 pandemic. The early months of the pandemic saw prices fall amid lower demand as people stayed home and large sectors of the economy shuttered for months.

Now that stores are opening up again and people are re-entering society, demand has soared as manufacturers and agricultural businesses struggle to keep up. That’s put pressure on Canadians’ bottom lines and it goes way beyond food — home and heating bills are also affected by the crunch.

Story continues below advertisement

“We see the strain with line-ups around the block of individuals who need assistance, and we know that is only going to increase as government supports end, as eviction moratoriums terminate,” Hetherington said.

“There will be more and more people who have to come face to face with additional debt and may not have the income they need and have to turn to organizations like the Daily Bread to make ends meet for their families.”

Several federal programs created as a way to support Canadians and Canadian businesses during the pandemic are set to expire on Saturday.

On Oct. 23, benefits such as the Canada Emergency Wage Subsidy, the Canada Emergency Rent Subsidy and Lockdown Support will no longer be active.

Those programs, along with the Canada Recovery Benefit, the Canada Recovery Caregiving Benefit, and the Canada Recovery Sickness Benefit, were set to expire on Sept. 25 but were extended during the summer as it became clear rebooting the economy would take more time.

Business groups have been lobbying the federal government to implement a long-term strategy as the pandemic carries on.

Click to play video: 'Small businesses fear looming end of wage & rent subsidy programs'
Small businesses fear looming end of wage & rent subsidy programs

As part of Budget 2021, released in April, the government said it could seek to extend the wage and rent subsidies to Nov. 20, should the economic and public health situation require further support. However, no announcement has been made yet.

Story continues below advertisement

“The pandemic is not over (and) for workers, long-term joblessness is a real concern,” said David Macdonald, senior economist with the Canadian Centre for Policy Alternatives.

“These have been really critical supports for a lot of households … and if they were to be withdrawn or substantially curtailed, which they’ve already been, it’s going to really squeeze certain households that have had a tough time with job loss over the pandemic.”

What’s the way forward?

Last week, Prime Minister Justin Trudeau’s office announced when the new government sits on Nov. 22, one of its first priorities will include pandemic supports.

Deputy Prime Minister Chrystia Freeland on Friday said that her priority “is to finish the fight against COVID, to allow our economy to continue to reopen, to allow our kids to continue to go to school.”

Story continues below advertisement

“And yes, that does mean we need to continue to be prudent and careful,” she said.

But in the long term, governments must zero in on ensuring that Canadians have access to income security, sustainable employment and affordable housing, Hetherington said.

“When we think about my parents’ generation, that opportunity to get ahead was generally done through homeownership, and that is just a fleeting dream for far too many Canadians,” he said.

“That is an opportunity to build wealth, to build an asset, and that is not something that’s available when you just are struggling to make ends meet and incurring debt to do that.”

McCracken encourages Canadians to reach out to a licensed insolvency trustee to find out how they can reduce debt.

“That’s one way that we can fix a situation where someone is having difficulty putting food on the table and saving for their retirement,” she said.

“We certainly encourage folks to reach out and resolve their debt issues as that’s something that every individual in Canada has an ability to do.”

— with files from Global News’ Sean Boynton


Sponsored content