Despite their best efforts, many low-income households in Canada have seen their finances deteriorate significantly over the past year and are having trouble finding the financial help they need, according to a new Seymour Management Consulting Inc. study commissioned by Prosper Canada and the ABLE Financial Empowerment Network and released today.
The Financial Resilience and Financial Well-being of Canadians with Low Incomes: Insights and analysis to support the financial empowerment sector report, shines a light on the negative impact the pandemic has had on the financial lives of low-income Canadians. The number of Canadian households with low incomes has grown significantly from 2018 to 2021 and the finances of these households continue to deteriorate, in contrast to the rebounding financial health of Canadians generally.
As of June 2021, 26.1% of households were low income (see definition p.2), representing 6.75 million households, up from 4.6 million in 2018. Canadians with low incomes were particularly hard hit financially by the pandemic. In June 2021:
- 68% reported barriers impacting their ability to earn money
- 68% said the pandemic had reduced their financial security
- 65% were experiencing significant financial hardship, up from 55% in June 2020
- 68% said housing affordability was a problem
- 40% were unable to meet essential expenses, up from 30% in June 2020.
“This report paints a stark picture of the growing financial challenges of millions of Canadians, despite these households making every effort to stabilize financially,” said Prosper Canada CEO, Elizabeth Mulholland. “The continuing deterioration of their financial health, while that of wealthier Canadians continues to improve, means greater hardship for millions of families, more pressure on our health and social services, and greater inequality in Canada. We need coordinated action now by governments, financial institutions and community actors to help Canadians with low-incomes to stabilize financially and begin rebuilding their financial health.”
To make ends meet, households with low incomes have resorted to financial measures that can undermine their longer-term financial health and resilience:
- 43% increased their borrowing to pay for everyday expenses
- 36% deferred mortgage payments
- 35% borrowed money from friends or family
- 7% took out a payday loan.
These actions are in addition to many positive financial behaviours such as budgeting, reducing expenses, finding new ways to earn money, moving to reduce accommodation costs, and setting up emergency savings.
“Community financial help providers are working flat out but their waiting lists just keep growing,” said Adam Fair, Chair of the ABLE Financial Empowerment Network’s Steering Committee. “Without action and resources to connect more struggling households to the financial benefits and hands-on help they need, this problem will only get bigger, at a terrible human cost to affected households and greater downstream costs to taxpayers.”
“Our report and Seymour Financial Resilience Index™ show that low-income households remain as, or more, financially vulnerable than they were pre-pandemic across many indicators, despite the many pandemic supports made available by governments and financial institutions,” concluded Eloise Duncan, Founder and CEO of Seymour Management Consulting Inc. and creator of the Index. “They are one key segment that could benefit from more targeted support from policymakers, financial Institutions and other organizations, to build a more resilient and equitable Canada.”
SOURCE Prosper Canada