Canadians on the Brink of Financial Insolvency and Canada’s Extension of Financial Aid

As the first quarter of 2021 has come and gone, there have been media reports describing an alarming new statistic that has recently been in the spotlight: the number of Canadians who are now on the brink of financial insolvency due to the pandemic is at a new five-year high. With more than half of Canadians being $200 or less from not being able to meet their monthly financial obligations, Canadians are being put in tough financial situations right before the summer months.

Although many Canadians have benefitted from pandemic-related financial support (from both the government and their employer in some cases), these deferral programs and assistances have begun slowing down and even ceasing completely as the pandemic still runs rampant. As these economic disruptions drastically affect household incomes, over 30% of Canadians say that they have already reached a point of insolvency and worry that they may or may not make it financially if the situation does not get better soon. With no money left at the end of the month to cover their payments, fear and uncertainty has gripped the minds of most Canadians as they worry about their future cash flow and the rising bills that are expected in the coming months as payments that were deferred come due.

Although the pandemic-related financial relief measures provided by the government over the past year has provided some breathing room for most low-income households in Canada, with the reversal of these financial relief measures in the recent months, most Canadians that fall into this category have virtually no wiggle room in their household budgets and are being forced to take on additional jobs or side hustles as a means of making ends meet.

With this in mind, it is possible that in the foreseeable future, we might eventually see an increase of households making late payments on their loans, mortgages or even credit cards. Even those who have been fortunate enough to maintain a steady income throughout this pandemic are not protected from Canada’s economy as they are finding less and less room in their budgets to weather this storm.

With the average Canadian having less money left over after making their monthly payments, more and more Canadians are taken on more debt as a direct result of the pandemic and are even being forced to use their savings to pay for daily expenses. This is a great example of why an emergency fund is so important as it can be used to shelter yourself from additional debt in situations where you may have lost your source of income or are unable to raise money quickly to pay off bills. In addition, many Canadians are being forced to use their credit cards or even their line of credit to pay off their bills – knowing full well that this is simply pushing off their financial issues to the next month.

Although some Canadians are spending less and saving more as a result of the pandemic, most Canadians are being pushed further and further into debt so that they can stay afloat in the hopes of getting their jobs back or finding employment with a higher wage and having a better chance of repaying their debts.

As Canadians continue to struggle to stay afloat through this pandemic, it is worth noting that some other countries, mainly in Europe, have gone ahead and provided similar financial aid as Canada has done for its citizens. In the UK, the conservative government has provided an extension to worker benefits as they begin new lockdowns across the country and Germany has even approved an increase in funding for businesses affected by health restrictions. Most European countries have extended, and increased funding based on their original pandemic plans that were put into place last year as the requirements have gradually increased as the pandemic has gone longer than originally anticipated. Although the financial aid that was provided by the government varies by country, most countries designed a relief plan that helped to subsidize businesses to keep workers on the payroll rather than letting these workers become unemployed. These furlough programs have helped in limiting any increases in the unemployment rate in countries like the UK, France and even Spain. These plans have been incredible in stabilizing the working force in times of uncertainty and have allowed societies to continue to function properly without any unnecessary concerns.

As Canada’s relief programs reach their end, I believe that Canada will take a page from many European countries and will extend their relief programs past the summer months and hopefully until September as a means to provide financial stability to those who need it and provide some certainty as interest rates begin climbing once again. I am under the impression that Canada should provide pandemic-related financial relief until a vaccine is widely available and until those who want to be vaccinated have the ability to be vaccinated.

While the economy is expected to return to its pre-pandemic levels once the vaccine has been widely distributed, the detrimental impact of the past year will continue to be felt by those who have lost their businesses or who have been permanently laid off and have had to empty out their savings simply to survive these past few months. For others, this pandemic has brought opportunities to spend more time with loved ones and to have potentially found a new outlook on life and/or a new career. In the end, the question will always relate to the government’s involvement and if they could have done more and/or if they should have acted earlier. Only time will tell which countries were able to deal effectively with the pandemic and which countries could simply not get their act together in time to help their citizens.

Comments

Let me know what you think about this post!

Feel free to follow us on social media!

Instagram: @themillennialoptimist

Facebook Page: The Millennial Optimist