More working Canadians are feeling financially stressed

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Thanks to a spell of higher prices and interest rates over the past year, more Canadians have been feeling the pinch in their wallets — and the National Payroll Institute is sounding the alarm.

About 41 per cent of working Canadians are financially stressed, up from 37 per cent last year, according to a report released Thursday from the association, which represents payroll workers and has been tracking Canada’s ongoing financial stress storm since 2021.

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“Despite signs of stability related to inflation and interest rates easing, it’s not nearly enough to curb some of the rising financial stress among working Canadians,” said Peter Tzanetakis, president and chief executive of the National Payroll Institute, highlighting the decline in the proportion of Canadians who feel financially comfortable (from 32 per cent to 28 per cent). “There has been a significant reversal of fortunes for many working Canadians.”

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Tzanetakis pointed to two major factors contributing to the rise in stress: increasing debts and housing costs. The report revealed nearly 60 per cent of those in the stressed cluster were spending over 40 per cent of their income on housing alone.

A previous report from TransUnion showed Canadian household debt hit a record high of $2.41 trillion in the second quarter of the year, with mortgage debt making up 74 per cent of the total outstanding balances.

It’s not just homeowners feeling constrained by higher costs either. Other research indicates renters face greater financial difficulty compared to homeowners, especially as renters tend to have lower salaries and put more of their after-tax pay into their housing costs.

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A quarter of respondents in the National Payroll Institute report said they were living paycheque to paycheque and admitted they would find it challenging if their pay was delayed by just one week. But even folks who earn six-figure salaries are struggling, with 29 per cent of respondents earning $100,000 or more living paycheque to paycheque.

Tzanetakis explained higher incomes don’t necessarily equate to less financial stress.

“It’s what you do with money that you get, and it’s those habits related to spending, saving and managing debt, that are core determinants of financial stress,” he said, adding that Canadians need to be proactive by paying their credit card bills on time and lower their overall debts.

This financial stress storm has a significant impact on the economy as well, the National Payroll Institute found. The time spent worrying about finances at work adds up to $53.9 billion in lost productivity for one year — up from $46 billion in 2023, $40 billion in 2022 and $27 billion in 2021.

As for whether the storm could worsen next year, Tzanetakis said it’s hard to predict.

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“The easing of inflation and the sort of the downward trajectory of interest rates could have a slightly positive impact,” he said. “However, people still need to take their household finances into their own hands and really improve their financial habits because that’s what’s going to really make an impact.”

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