BDO Canada Affordability Index: Over a quarter of Canadians still don’t have enough for their needs

More than half of Canadians are living paycheque to paycheque as debt continues to overwhelm

 

TORONTO, September 30, 2019The annual BDO Canada Affordability Index, which examines how affordable life is in Canada, reveals that as Canadians struggle to make ends meet and manage growing debt, future financial plans, like retirement, are increasingly put on the backburner. Over half (53%) of Canadians continue to live paycheque to paycheque and debt remains overwhelming for 25%. Over a quarter (27%) of Canadians still don’t have enough for their needs and less than half (42%) have enough money to spend on their wants.

The poll of 2,047 Canadians, conducted by Angus Reid in partnership with BDO Canada Limited, shows that more Canadians (57% compared to 53% in 2018) are carrying the burden of credit card debt and for 31%, debt is increasing due to income constraints. This suggests that many Canadians will be forced to carry debt into their later years. Three-in-10 (31%) Canadians have delayed paying off their credit card balances because they can’t afford it and four-in-10 have a non-mortgage debt load of over $20,000.

Affordability and debt challenges continue to weigh on Canadians, and what our Affordability Index reveals is that, over time, the cumulative effects have a significant impact on financial goals,” says Doug Jones, president of BDO Canada’s Financial Recovery Services practice. “However, for people with unmanageable debt, a Licensed Insolvency Trustee can help them understand their options and become more financially prepared for the future.”

Retirement top of mind, yet increasingly on the backburner

The study also reveals that a growing number of Canadians are not well prepared for retirement, even those approaching their retirement years. More Canadians (39% compared to 31% in 2018) admit to having no retirement savings, including one third (32%) of boomers and seniors.

Meanwhile, the retirement outlook for Gen Xers (aged 35-54) is worsening. Among the almost four-in-10 (38%) Gen Xers who have no retirement savings (compared to 33% in 2018), almost half (47%) say they can’t afford to save for retirement, and 19% say they need to pay debts off first.

A potential reason for Gen Xers’ lack of savings can be attributed to their debt load. Gen Xers continue to be the most indebted generation. Among the 75% of Gen Xers with debt, six-in-10 (59%) carry a credit card balance and over half (55%) have a mortgage (vs 38% of millennials and boomers/seniors). Over two-in-five (44%) indebted Gen Xers have a debt of over $20,000.

“An increasing number of Canadians in their 40s and 50s are financially stretched and unprepared for retirement and unexpected costs,” adds Doug Jones. “This can lead to a greater reliance on debt to support living expenses. But with a strong plan to help them manage their debt, created with the advice of a professional, Canadians have the power to improve their financial readiness.”

For too many Canadians, the solution may mean working longer. Compared to our 2018 Affordability Index results, a growing number of not-yet-retired Canadians agree that younger generations will have to work longer than the generation before them (82% vs 75% in 2018). Almost seven-in-10 (69%) of Canadians say that even if they save, they still won’t have enough to last through their retirement years (compared to 64% in 2018).

Women, lower income individuals, and Gen Xers still struggle the most with affordability

As compared to men, more women in Canada face affordability challenges. Women are more likely to have growing debt due to lack of income (35% of women vs 28% of men), and are more likely to struggle to save for a major purchase (75% women vs 70% men), afford grocery bills (33% women vs 24% men)and take a vacation (70% women vs 63% men).

The Affordability Index also shows that women’s affordability challenges have increased compared to last year. A growing number of women are living paycheque to paycheque (59% vs 54% in 2018) and more admit to having no retirement savings (43% vs 35% in 2018).

Compared to average Canadians, women along with lower income individuals (income less than $50,000), millennials and Gen Xers are also particularly vulnerable to affordability and debt challenges, rating their financial readiness as “poor” or “terrible” for these significant life events:

  • Unexpected costs (50% total; 56% of women, 55% Gen Xers, 65% lower income)
  • Retirement (56% total; 62% women, 71% millennials, 62% Gen Xers, 71% lower income)
  • Purchasing a home (57% total; 60% women, 67% millennials, 76% lower income)
  • Having children (54% total; 62% millennials, 76% low income)

Recent years have been challenging for Canadians. As reduced affordability and debt obligations continue to weigh, the BDO Canada Affordability Index points to more challenges ahead. In order to change course, Canadians should be actively seeking ways to improve how they balance their debt obligations and future financial goals.

BDO Canada Limited has 66 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.

To read the BDO Canada Affordability Index click here.

About the BDO Canada Affordability Index

In partnership with BDO Canada, Angus Reid Global conducted an online survey from August 7-13, 2019, 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.

About BDO Canada Limited’s Financial Recovery Services practice

BDO Canada Limited’s Financial Recovery Services practice is one of Canada’s oldest (operating since 1958) and largest debt help firms with offices across the country. BDO’s advisors include Licensed Insolvency Trustees (Officers of the Court and licensed by the OSB) and Proposal Administrators providing credit counseling, consumer proposals and personal bankruptcy services.

About Angus Reid Global

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 Global 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.

For further information: Media inquiries please contact: Hayley Shaughnessy at Proof Inc., 416-969-2717, [email protected]

Licensed Insolvency Trustees Since 1958