Canadians face many affordability challenges; debt is a roadblock


Canada is one of the world’s most prosperous countries, but three quarters of Canadians live under the burden of debt.

BDO Canada Limited’s inaugural Affordability Index finds that three-in-10 (31%) Canadians say they don’t have enough money to pay for their basic needs. More than half (52%) have just enough to cover living costs.

Clearly, affordability is a problem.

“What our Affordability Index sheds light on is how serious the financial challenges are for so many Canadians. This lack of affordability suggests that a significant group of Canadians take on debt to cover their spending and many find themselves feeling lost and overwhelmed by this debt.”

Doug Jones, President of BDO Canada Limited

How does debt affect Canadians?

Debt has become a roadblock for a lot of Canadians, affecting their ability to afford everyday necessities and prepare for what’s ahead. It’s concerning that Canadians appear to be financially unfit for the future—and debt may be contributing to that lack of readiness. For those who say they “have a lot of debt”, many of life’s milestones are challenging to handle.

What do Canadians with a lot of debt feel financially unprepared for?

Women, millennials and Gen Xers face some of the biggest challenges, being more likely to struggle to afford necessities:

  • 43% of women find it challenging to afford transportation costs.
  • 33% of millennials and 29% of Gen Xers struggle to feed their families.
  • 42% of Canadians with children struggle to pay for essential utilities.

Debt likely plays a large part in their struggles. Compared to the average indebted Canadian, heavier debt is most common among women (52%), millennials (49%) and Gen Xers (57%).

Who is burdened with overwhelming debt?

One-in-four Canadians have seemingly reached a breaking point. It’s not surprising that those feeling most overwhelmed by their debt tend to be younger, earning less, and dealing with the cost of raising a family and paying down a mortgage and other debts.

Canadians that say their debt load is overwhelming and they don’t know what to do about it:

What are Canadians putting off?

Nearly three-in-four (73%) Canadians have delayed expenses over the past two years because they couldn’t afford them. Sometimes this means putting off vacations, but many have also delayed more significant expenses including:

  • Paying off credit card debt
  • Buying a car
  • Buying a home
  • Pursuing higher education
  • Retiring at the age they thought they would

While affordability challenges aren’t solely because of too much debt (and these challenges don’t always result in debt), the findings of the BDO Canada Affordability Index suggest that debt is a major factor. It’s critically important that Canadians—especially those who are carrying a lot of debt—take steps to manage their debt before it compromises future financial stability.

Will you buy a home in the next five years? Here’s what non-homeowners said:

It’s clear that home ownership isn’t necessarily a rite of passage in Canada anymore, and affordability has a lot to do with this new reality. Three-in-four who don’t own a home say they’re not likely to buy one anytime soon. Most people who say they are not likely to buy a home say it’s because they can’t afford the down payment or haven’t saved enough.

60% of this group blame their finances, including:

  • Living paycheque to paycheque/don’t have enough money
  • They’re broke
  • It’s too expensive/the high cost

Findings from the Index suggest the affordability of owning a home is out of reach for many Canadians as they struggle to meet the cost of living while balancing other financial challenges such as high debt loads and lack of savings.

How do families fare?

Canadians with children are far more likely to say that their personal debt is so overwhelming that they don’t know what to do about it (34% vs 20% of those with no children).

Everything seems to add up—food, housing and utilities, transportation, saving for retirement, leisure and clothing—and Canadians with kids are more likely to find it challenging to pay for these expenses than those without kids.

Once again, debt and affordability challenges seem to go hand-in-hand. It’s no coincidence that Canadians who are more likely to be raising a family (those under 55) are also more likely to carry heavier debt.

Gen Xers, especially, are feeling the squeeze. All but a small number of 35-54 year olds have debt (83% vs 17% no debt), with almost half (48%) paying off a mortgage.

Here’s what Gen Xers revealed about their personal debt loads:

It’s not easy for dual or multi-income families either. Only one-in-five (20%) Canadians strongly agree that they have enough money to buy the things they need, even when factoring in all family members’ income. Nearly one-fifth (18%) of Canadians have a child over the age of 18 still living at home and three-quarters (76%) of those families say it is because it is too expensive for the adult child to move out.

What about saving for retirement?

Most Canadians view saving for retirement as their number one need, and most challenging to afford.

69% of all Canadians say saving for retirement is challenging to afford. Who struggles the most?

Almost all Canadians seem to be resigned to spending more time in the working world. They expect to have to work longer before they can retire. Nearly nine-in-10 retirees (86%) agree the next generation will need to work longer than they did.

Among those who haven’t yet retired, three-in-four (75%) agree they’ll need to work longer than their parents did before they can retire. Millennials are the most likely to have this view. But most Gen Xers (73%) and Baby Boomers/Seniors (70%) think it will take longer too. Findings strongly suggest that debt and lack of affordability are blocking Canadians’ efforts to accumulate enough savings to retire when they want.

Almost two-thirds of Canadians say they have little to nothing saved for retirement.

Is anyone better off?

Canadians are divided when it comes to what stage of life is the most expensive.

The 30s are considered the priciest (say 27% of Canadians). Which is often when people are buying homes or starting (or growing) their families. The cost of everyday life seems to go down when people reach their 40s and stabilize into their 50s.

When comparing themselves to other generations, most Canadians don’t think they have it better financially. Canadians tend to see each new generation as having it worse than the last. There is an exception—about half of Gen X and Baby Boomer/Senior Canadians think they have the edge over millennials when it comes to the affordability of housing. Only a minority of younger Canadians see themselves as having any sort of financial advantage over Baby Boomers/Seniors, and most millennials say they have it worse by every possible measure than their elders.

How will debt affect Canada’s future?

Ultimately, the debt carried by Canadians affects everyone. Whether it’s young adults saddled with student debt, parents concerned about growing expenses, couples struggling to save for retirement or seniors trying to make ends meet, affordability and debt challenges don’t just touch those who are experiencing them. The financial well-being of previous and future generations are also affected.

Our society is aging, putting pressure on health care and leading to shortages of skilled workers in many fields. In the most recent census, for the first time Canada had more seniors than people under 15. If debt remains out of control, it will affect everyone’s future. More than two-in-three Canadians (65%) say they have little or no retirement savings—that amount jumps to seven-in-10 (70%) when Canadians carry debt. Almost half (47%) of millennials say they haven’t got any retirement savings at all.

But, there’s good news

It’s encouraging to learn that the majority of Canadians with debt have taken steps to pay it down—half (52%) say reducing their debt load is a top-three priority for saving. Among Canadians with personal debt, more than half say they’ve reduced their non-essential needs to reduce their debt. Four-in-10 have reworked their budget to cut expenses. They make sacrifices—selling possessions, cutting up credit cards, getting a second job or a side gig or choosing to rent instead of own.

Here’s what Canadians are doing to reduce their debt:

For those who are still struggling, the good news is that a debt professional can help Canadians navigate these waters.

“With a strong plan to help them manage their debt, created with the advice of a professional, Canadians can work to bring their debt down and their savings up.”

Doug Jones, President of BDO Canada Limited

BDO Canada Limited has 62 Licensed Insolvency Trustees (LITs) across the country to help Canadians work through their debt and find the best solution.

LITs are the only professionals that are licensed by the federal government who can file consumer proposals or bankruptcies on behalf of individuals. The BDO Canada Affordability Index finds that Canadians who have a lot of debt or are feeling overwhelmed are more likely to seek an LIT’s advice, once they understand how an LIT can help.

Find an LIT near you

About the BDO Canada Affordability Index

These are some of the findings of an Ipsos poll conducted between July 3 and July 6 2018, on behalf of BDO Canada Limited. For this survey, a sample of 2,000 Canadians aged 18+ from Ipsos’ online panel was interviewed online. The poll is accurate to within ±2.1 percentage points, 19 times out of 20.

Licensed Insolvency Trustees Since 1958