Are working Canadians at risk of a spending relapse?

New survey suggests financial windfalls and gains earned during the pandemic could be eroded or lost

Are working Canadians at risk of a spending relapse?

Since March 2020, millions of Canadians have been able to work from home, which has translated into substantial financial windfalls for many. But as the economy reopens, will they be able to maintain or build on those gains – or will they backslide into debt and overspending?

That’s the question posed by the Canadian Payroll Association as it released the latest edition of its Annual Survey of Working Canadians.

"When it comes to financial wellness, this moment between the 'COVID reality' and 'new normal,' is a critical tipping point for Canadians," Peter Tzanetakis, president of the Canadian Payroll Association, said in a statement.

According to the research, 51% said they are paying less in work-related expenses, while 72% said their discretionary expenses have gone down. Because of that, 53% of working Canadians have managed to save more than they did a year ago, and around seven tenths (71%) said they now spend less than their net pay in a typical pay period, marking an all-time high.

That has helped push the number of respondents living paycheque-to-paycheque down to 36%, the lowest over the past 13 years. The number of respondents putting more than 10% of their pay towards savings has reached 40%, up from 34% in 2019, and 48% said they would be able to manage an unexpected expense of up to $20,000. Meanwhile, four out of five (79%) said they can put together $2,000 in case of an emergency.

But all that could change as offices are set to reopen and the rules that have erased so much discretionary spending wind down. According to the survey, 68% of Canadian workers plan to dial their travel expenses back up to pre-pandemic levels, and 37% agree they probably will not be able to sustain their savings habits post-COVID.

“The economic recovery relies on increased spending, so spending isn't a bad thing,” Tzanetakis said. “The risk, as it relates to the financial wellness of working Canadians, is in individuals spending beyond their means.”

Among poll participants with credit card debt, one in ten said it will take them more than five years to pay it off, while a further 35% said they’ll need between one and five years. Four tenths (43%) said they make the minimum payment required on their debts, holding them back from saving money; the same proportion of respondents said they “feel overwhelmed by debt.”

Persistently high housing costs and the potential for rising interest rates could also be a problem. When asked what economic issues concern them, 56% of those polled cited housing costs, while 55% identified higher interest on mortgages.

"If some of the behaviours forced upon us during lockdown are not transformed into habits – and our survey shows for many, they will not be – working Canadians may once again be faced with the stresses of mounting debt and living paycheque-to-paycheque."