It’s no surprise that the COVID-19 pandemic is hitting Canadians in the wallet. But how hard, and is government support making a difference?
It turns out more than half of Canadians said their financial situation has suffered, according to the most recent survey by the credit reporting agency, TransUnion.
Are you worried about your income? Your ability to save? Your ability to pay bills?
You’re in good company, especially if you’re younger. The third installation of a TransUnion survey suggests 59% of Canadian households have been financially affected by unemployment, fewer hours of work or loss of business income. This stat is down slightly from 63% in the company’s survey a week ago, suggesting government subsidies have eased the pressure slightly.
Who’s Been Hardest Hit
The impact has been greatest among Gen Z, 75% of whom said their household income was affected. Next are millennials, 70% of whom said the same, though this was down 6% from the week before. This trend corresponds to the generations most affected by job losses or work-hour reductions, with Gen Z indicating the greatest job losses at 38% (of the 59% who said they were affected), followed by millennials at 29%.
Among Gen X, 64% indicated a financial impact, down 3% from last week. And baby boomers responded with 43%, down 7%.
Loss of Income
The number of respondents who said they had lost their jobs (25%) or had their work hours reduced (30%) stayed steady week-over-week.
But more small business owners said they had to close or had orders dry up, at 11%, up 1% from the week before.
What People Are Worried About
Paying bills was top of mind for respondents, with 66% saying they were worried about paying bills and loans, though this was down 2% from last week.
Respondents who have been affected by the pandemic said they’ll fall short by $1,035.20 on average.
The top worries included paying off credit cards, followed by phone bills, then rent and utilities. Credit card debt remains the biggest concern for all generations, except for Gen Z, who fretted most about rent.
Looting Retirement Savings
The survey also found that these are the top ways respondents are planning to pay bills and loans:
- Twenty percent said borrow money from friends or family
- Twenty-eight percent said they would use money from a tax-free savings account or retirement fund
- Eight percent said they would take out a loan
- Nineteen percent didn’t know how they would pay
Withdrawing funds from retirement savings could affect future retirement goals and should not be the first resort. The worst time to withdraw money from invested funds is when stock markets are down. Plus, withdrawing funds from Registered Retirement Savings Plans (RRSPs) before retirement will have tax implications.
The government, along with many companies, have devised plans to help consumers, clients, and customers. Here are some of the relief efforts put forth.
For those with loans and mortgages, lenders are working with borrowers to defer payments.
Canada’s big banks are also offering payment deferral plans for credit card bills.
But be aware that payment deferral is not waiving payments. You will still accumulate interest on the growing balance. Although, for credit cards, the larger banks have also announced reductions in interest rates for those who have made a deferral agreement.
The deferral programs on mortgages, loans and credit cards can give you some breathing room if your income has taken a nose-dive, but you may be worried about the potential effect on your credit score.
Many financial institutions will work with credit bureaus to ensure that customers who have arranged for deferral will not take a credit-score hit. But it’s still worth keeping your eye on your credit report nonetheless. In Canada, the two main credit bureaus are Equifax and TransUnion. You can request your credit report from both these companies for free at least once a year.
Equifax suggests adding a consumer statement to your credit report. This document states that you have been affected by the Coronavirus pandemic and that you intend to make full payment as soon as you can. It also leaves a paper trail if you encounter any issues.
The Canada Emergency Response Benefit (CERB) is available to those who have lost jobs as a direct result of the pandemic. It pays a maximum of $500 a week for up to 16 weeks. But be aware that the benefit is taxable, which means you may have to pay back a percentage next year when filing your 2020 taxes.
Inquire About Relief Measures
As this is an unprecedented situation, many companies, lenders and landlords are working with people whose income has been affected by the pandemic.
According to TransUnion’s survey, about half of millennials (51%) have reached out to companies to discuss payment options. Gen Z indicated 43% did so, and Gen X and baby boomers said 32% and 31%, respectively.
By reaching out to service providers and financial institutions, you may be able to find solutions or payment plans to ease financial burdens.