As the full financial repercussions of the COVID-19 pandemic continue to unfold, a new national survey by Credit Canada reveals how Canadians fare when faced with a financial setback. On May 5, the non-profit credit counselling agency released a study to benchmark the threats and realities of how crisis-proof Canadians are in terms of their financial lives.
The 2020 Survival Guide Study, an Angus Reid poll of 1,504 Canadians, found that two-in-three respondents (66%) said job loss or reduced income would (or already has) caused them a severe financial crisis. Meanwhile, more than half (53%) said a health/mental health crisis has the potential to trigger financial turmoil. Other highlights include:
- An unexpected expense (49%)
- Death of a loved one (41%)
- Marital breakdown (41%)
“Canadian households are more vulnerable than ever as COVID-19 gives rise to a new wave of financial worries and consumer debt,” said Keith Emery, Co-CEO of Credit Canada. “As we have consistently seen, financial insecurity, healthcare and mental health are inexorably linked, and this reality is only heightened during such an unprecedented time.”
The survey also explored where Canadians seek help when managing their finances during difficult times. Divestment of savings, stocks and RRSPs (45%) lead the way, quickly followed by taking a line of credit (42%). One-in-three (35%) would seek help from family/friends and three-in-10 (30%) would use a credit card.
Of note, four-in-10 of Canadians aged 18-34 would use credit cards to get out of a difficult financial situation compared to one-in-three 35-54-year-olds and 21 per cent of those aged 55+.
Canadians would also consider other paths such as turning to an employer, non-profit credit counselling, bankruptcy/insolvency and payday loans.
“There is a new cohort of people from COVID-19 who will face financial challenges they have never experienced before; we need to educate them on what happens when they go down certain financial paths,” said Emery. “It’s encouraging that payday loans and cash advances are at the bottom of the list and seen as a last resort.”
While a great deal of government assistance and leniencies from banks have been introduced (such as reduced credit card interest rates and mortgage deferrals), many Canadians are still struggling to make ends meet.
To that end, the survey asked: “If you were to experience financial difficulties such that you couldn't afford to pay all of your bills, which bill would you most likely miss paying?” One-in-three would miss paying their credit card bill, one-in-four would skip their utilities bill. These are followed by: taking on a line of credit (19%), mortgage/rent (8%), insurance (7%) and car payments (4%).
It’s important people understand the consequences of these choices. For example, while there are currently some mortgage payment deferrals available in Canada on a case-by-case basis, people need to contact their service providers (such as insurers or utilities) before missing a payment to confirm their options and the consequences of missing a payment.
The full results of the 2020 Survival Guide Study are available through the contacts below.
— Credit Canada