While one-in-five (18%) Canadians are better off, nearly two-in-five (39%) are worse off
TORONTO, Oct. 13, 2020 /CNW/ - According to the third annual BDO Canada Affordability Index, which examines how affordable life is in Canada, the COVID-19 pandemic has widened the affordability gap, intensifying economic disparities across the country. The survey revealed that more than twice as many Canadians are worse off financially due to the pandemic compared to those whose personal finances have improved (39% vs 18%). Canadians who are worse off are almost four times as likely (46% vs 12% of those better off) to say that their debt load is overwhelming due to the COVID-19 pandemic, and that feeding their family is challenging vs those who are better off (30% vs 14%).
The survey of over 2,000 Canadians, conducted by the Angus Reid Group in partnership with BDO Canada Limited, shows a clear divide between Canadians who are losing ground and those whose financial situation hasn't changed or has improved during the pandemic. Canadians are more likely to have had their personal finances worsen this year if they are self-employed (60%), employed part-time (44%), have experienced layoffs or reduced salary during the pandemic (67%) or have an income under $50,000 (42%). Canadians are more likely to have benefitted financially during the pandemic (18% overall) if they did not experience layoffs or reduced hours due to the pandemic (24%), are younger at 18-24 years old (32%) or 25-34 years old (25%) and have a higher income of over $100,000 (23%).
"For the past three years, the BDO Canada Affordability Index has shown that Canadians are struggling more and more with the cost of living," said Doug Jones, President of BDO Debt Solutions. "Faced with COVID-19, however, the perception of affordability has changed. Canadians are saving and cutting back on spending but they are also finding it more difficult to keep up with debt. These factors will likely put long-term stress on families and the economy."
Debt and disparities remain
Those Canadians who already faced financial security challenges before the pandemic have not fared well since the pandemic began. According to the survey results, two-thirds (66%) of Canadians with debt cannot keep up with their debt payments or have had to make sacrifices in their budgeting in order to do so. While this typically involves foregoing non-essential "nice-to-have" purchases like entertainment or recreation, just under one-quarter (23%) must forego essentials like food or clothing or they cannot meet their payments.
Debt is not going anywhere for some Canadians this year. Among those with increasing debt, almost three-in-four (73%) say it increased more this year than in 2019, suggesting some Canadians' debt is accelerating due to the pandemic. Furthermore, for the two-in-five (39%) Canadians who have accrued more debt due to the pandemic, they tend to have less education and lower income. Accruing additional debt during the pandemic is also more likely for residents of British Columbia, Alberta and Ontario.
Those who are worse off due to COVID-19 are significantly more likely to report affordability challenges but may not be confident in seeking help. Only three-in-10 (29%) Canadians who have taken on extra debt have applied for government benefits.
"A significant number of Canadians are losing confidence in their ability to manage their finances, yet they are reluctant to seek help," noted Jones. "At BDO, we are encouraging people more than ever to start having conversations, consider re-evaluating short and long-term financial goals and to seek professional debt advice if they are feeling discouraged, scared or unsure of their financial outlook."
Canadians rethinking wants versus needs spending
The pandemic has framed the way many are spending money and engaging in the economy. While two-in-five (42%) Canadians are savings less, nearly three-in-10 (28%) are saving more. For three-quarters (76%) of Canadians saving more during the pandemic, the primary reason is decreasing non-essential spending. However, those Canadians who are saving more (28%) are more likely to be younger (44% of Gen Z and 33% of 25-34-year olds), university educated (34%) and earn more than $100,000 (36%). For those who haven't taken a financial hit during the pandemic, shifting spending away from non-essentials such as restaurants, events and travel, has increased perceptions that they can buy things they need and want and has reduced concerns about debt.
The survey also found that while Canadians are reporting fewer affordability challenges overall during the pandemic compared to 2019, those who are worse off due to COVID-19 are significantly more likely than other Canadians to be facing affordability challenges across the board. For these Canadians, the financial challenges remain a threatening reality and even essential spending is being impacted. One-in-10 (13%) Canadians with debt are having to cut down on essentials such as food and clothing to make their payments.
Shifting financial priorities from long-term goals to emergency savings
The survey showed over half of all Canadians (51%) said saving for an emergency fund is more important now than pre-pandemic, versus three-in-10 (28%) saying retirement savings are more important and two-in-10 (19%) saying home improvement or renovations are more important. One-in-five (20%) are slowing down (or thinking of slowing down) their savings goals as a result of COVID-19.
While some may make quick changes for retooling budgets, one-in-five (20%) Canadians have (or have considered) decreasing their long-term savings. Of those, one-third (32%) have done so to bolster emergency funds or short-term savings. One-quarter (24%) have also pushed out their retirement date.
This is a financially challenging time for Canadians as reduced affordability and debt obligations continue to carry weight. According to the survey results, for Canadians with debt (64%), the most common type continues to be credit cards with balances (58%), followed by mortgages (49%) and car loans (38%).
"We are encouraging Canadians to remain vigilant," said Jones. "Now is the time to keep a close eye on household budgets and avoid debt whenever possible. If you are struggling, seek advice from a professional. A Licensed Insolvency Trustee can help address any concerns you may have about dealing with your debt during the pandemic."
BDO Debt Solutions has over 160 locations across Canada and over 60 Licensed Insolvency Trustees (LITs). BDO's LITs and debt professionals are committed to helping Canadians take control of their financial future and turn the page on debt. LITs are the only professionals that are licensed by the federal government to file consumer proposals or bankruptcies on behalf of individuals.
About the BDO Canada Affordability Index
In partnership with BDO Canada, Angus Reid Global conducted an online survey from September 1-8, 2020, among a representative randomized sample of 2,047 Canadian adults who are members of the Angus Reid Forum. For comparison purposes only, a probability sample of this size with this sample plan would carry a margin of error of 2.2 percentage points, 19 times out of 20. Discrepancies in or between totals are due to rounding.
Complete results of the 2020 BDO Canada Affordability Index are available through the contact below.
About BDO Canada Limited's Debt Solutions practice
BDO Debt Solutions is one of Canada's oldest and largest debt help firms, helping Canadians find the right solutions to their debt problems since 1958. In offices across the country, BDO's local teams of debt professionals include Licensed Insolvency Trustees (Officers of the Court and Licensed by the OSB), Proposal Administrators and Credit Counsellors who provide consumer proposals, personal bankruptcy services and credit counselling.
About the Angus Reid Group
Angus Reid is Canada's most well-known and respected name in opinion and market research data. Offering a variety of research solutions to businesses, brands, governments, not-for-profit organizations and more, the Angus Reid Group team connects technologies and people to derive powerful insights that inform your decisions. Data is collected through a suite of tools utilizing the latest technologies. Prime among that is the Angus Reid Forum, an opinion community consisting of engaged residents across the country who answer surveys on topical issues that matter to all Canadians.
The survey consisted of a representative sample of 2,047 Canadians 18+ who are members of the Angus Reid Forum. The sample was balanced and weighted to census proportions on age, gender, region and level of education. Survey fielding was conducted on September 1 to September 8, 2020. For comparison purposes only, a probability sample of n=2,047 would yield a margin of error of +/- 2.2%, 19 times out of 20.
SOURCE BDO Canada Limited
For further information: Media inquiries please contact: Irina Vukosavic at Proof Inc., 416-969-2656, [email protected]