Financial Resilience Institute says things have worsened in the last two years
If the last few years has taught us anything, it’s that we cannot always predict an incoming and fast-developing crisis, but we can be prepared for the unexpected.
For those with financial resilience, the pandemic, war in Ukraine, inflation, and interest rates were concerning but did not risk financial ruin. But most Canadians are not in this enviable position.
A new report from the Financial Resilience Institute warns that 19.5 million Canadian adults – 76% of the population - are defined as ‘not financially resilient’ and things have worsened in the past two years.
The share of financially resilient households has decreased from 31% of the population in June 2021 to just 24% in June 2023.
And having a six-digit income does not necessarily mean things are OK. The report found that 22% of those households with an income of more than $150,000 are deemed to be ‘extremely vulnerable’ or 'financially vulnerable' based on the June 2023 Seymour Financial Resilience Index.
More than half of households report high levels of financial stress, 60% say their quality of live has been impacted by the cost of living, and 48% say their money worries make them feel physically unwell.
For those struggling the worst, 42% are facing significant hardship, 23% cannot meet everyday expenses, and 16% cannot get the food they need.
Debt and savings
While many poll participants are taking positive steps to shore up their finances, such as reducing non-essential spending, the cost of living is still impacting their ability to save and reduce debt.
Specifically:
- one third of Canadians have increased their borrowing to pay for essential expenses
- 42% have had to draw down on savings to meet their debt obligations
- only 50% of Canadians currently maintain a liquid savings buffer of three months or more as of June 2023, a notable decrease from a high of 64% in 2017
- nearly a quarter of the population (24%) has a buffer of less than three weeks
- 37% of Canadians have either a negative or zero household savings rate as of June 2023
Those with a variable rate mortgage are more impacted (88%) by the interest rate hikes than the wider population (66%) and just 18% were deemed financially resilient in June 2023 compared to 33% two years earlier.
