With Canada’s high inflation rate peaking at a staggering 8.1% in June, a new survey found many Canadians are now going into debt to sustain their spending.
Domestic inflation eased slightly in July, dropping 5%. Still, a sharp rise in prices in 2022 will hit many individuals and businesses in the country, according to a study released Aug. 16 by personal finance comparison site Finder.com.
Taking on debt to pay bills often means taking on a personal loan. According to the survey, which interviewed more than 1,000 Canadians about how they dealt with inflation, one in four admitted to doing so to cover expenses.
It also found that about 7.3 million Canadians over the age of 18 are using loans and other debt to help manage inflation.
Main reasons for borrowing
Survey respondents cited paying bills, consolidating debt, and covering living expenses after unemployment as the most common reasons for going into debt.
However, other important expenses such as car purchases, education, and home renovations weren’t far behind.
This has resulted in many Canadians reporting reduced spending. Nearly 60% reported spending less on luxuries such as clothing and entertainment, and 43% said they spent less on major purchases such as home improvement and travel.
“Middle-income earners are really suffering,” Romana King, Finder’s senior financial editor, said in a release.
“Data show that wages have not kept pace with rising costs of living, putting the majority of Canadians, middle-income earners, in a tough spot. We are forced to prioritize and find ways to achieve our goals.”
Young Canadians are in increasing debt
Rising costs of living are impacting all age groups, but the survey found that Canada’s youngest adults are being hit hardest.
Of the respondents, 27% of Millennials ages 27-41 reported borrowing money to pay back their expenses, and 26% of Gen Z respondents ages 18-26 It followed closely.
The survey also found that 27% of Gen X respondents between the ages of 42 and 56 are in debt to fight inflation.
Baby boomers are less likely to borrow money, with only 18% reporting taking out a loan to cover their expenses. But it was also the group that cut spending the most, at 66%.
Housing costs are leading to more financial headaches
Many Canadians cited housing costs as their top concern when asked how inflation is affecting their household budgets overall.
By 2022, 1.3 million people over the age of 18, or about 4% of Canadians, will report being behind on their rent or mortgage.
The study found that renters are more at risk than homeowners with mortgages, with an estimated 9% of renters delinquent in payments, as opposed to 6% of homeowners. I’m here.
Gen Z respondents were four times more likely than baby boomers to consider moving for cheaper housing, at 12% and 3%.
“It’s easy to get overwhelmed when inflation raises the cost of living,” King said, adding that cutting unnecessary spending can typically lead to savings of about 15% for most Canadians. I added that there is.
High Inflation Leading Canadians Into Debt
Source link High Inflation Leading Canadians Into Debt