Amid high inflation rates in Canada, which peaked in June at 8.1%, a new poll has found that many Canadians are now turning to debt to meet their expenses.
July saw a slight decline in the national inflation rate, down 5%. Still, steep price increases in 2022 have hurt many individuals and businesses across the country, according to a survey released Aug. 16 by Finder.com, a personal finance comparison site.
Going into debt to pay bills often means taking out personal loans. According to the poll, which asked more than 1,000 Canadians about how they deal with inflation, one in four admitted doing so to cover expenses.
It also revealed that about 7.3 million Canadians over the age of 18 used loans or other forms of debt to keep up with inflation.
MAIN REASONS FOR DEBT
Survey respondents cited paying bills, consolidating debt and covering living expenses after losing a job as the most common reasons for getting into debt.
But other big expenses like buying a car, education and home renovations weren’t far behind.
This has led many Canadians to report a reduction in spending. Nearly 60% said they are spending less on luxury items like clothing or entertainment, while 43% said they have reduced the amount they spend on major purchases like home improvements or travel.
“Middle-income people are really struggling,” Romana King, Finder’s finance editor, said in a statement.
“The data shows that wages are not keeping pace with the rising cost of living, which puts middle-income people – the majority of Canadians – in a difficult position. This forces many of them to start prioritizing their spending and finding ways to make ends meet.
YOUNG CANADIANS ARE MORE IN DEBT
Although the rising cost of living is affecting all age groups, the youngest adults in Canada have been hardest hit, according to the survey.
Among respondents, 27% of Millennials aged 27-41 said they had taken on debt to pay for expenses, followed closely by 26% of Gen Z respondents aged 18-26.
The survey also found that 27% of Gen X respondents, aged 42 to 56, also took on debt to fight inflation.
Fewer baby boomers have taken on debt, with just 18% saying they took out loans to meet expenses. However, it is also the group that has reduced its expenses the most, at 66%.
HOUSING COSTS LEAD TO MORE FINANCIAL HEADACHES
Many Canadians cited housing expenses as their top concern when asked how inflation affected their overall family budget.
In 2022, 1.3 million people over the age of 18 – or about 4% of Canadians – reported being behind on their rents or mortgages.
The survey found that renters are more at risk than landlords with mortgages, with nine percent of tenants estimated to be behind on payments, compared to six percent of landlords.
Gen Z respondents were four times more likely to consider moving for lower housing costs than Baby Boomers, at 12% versus 3%.
“It’s easy to feel overwhelmed when inflation increases the cost of living,” King said, adding that cutting unnecessary expenses can typically save around 15% for most Canadians.