Why Canadians' financial stress has reached the point of a 'wake up call'

The Canadian financial stress crisis is growing worse and worse. The 16th annual National Payroll Institute (NPI) Survey of Working Canadians released last week found that what the NPI calls a “financial stress storm” has only intensified since the NPI began tracking it in 2021. The number of individuals in the ‘stressed’ cluster rose four per cent between 2023 and 2024, from 37 per cent to 41 per cent. The number of individuals in the comfortable category fell at a similar rate in the same time period, from 32 per cent to 28 per cent. Fully one quarter of respondents said they are living paycheque-to-paycheque.

The results were so glaring that the NPI issued a “wake up call” with the release of their findings. Peter Tzanetakis, President of the NPI talked through some of the results and the forces he sees driving them. He highlighted the fact that income does not seem to be the sole determinant of financial stress and emphasized the steps benefits plans and plan sponsors can take to help alleviate the stress many of their employees now face.

“Despite some signs of stability with inflation and interest rates easing, that’s certainly not nearly enough to curb the rising financial stress among working Canadians,” Tzanetakis says. “It’s gotten to the point where if action isn't taken now, things are going to become much more pronounced for working Canadians.”

Tzanetakis highlights two interconnected drivers of Canadians’ financial stress levels: debt and housing. Personal debt levels have risen significantly in recent years as Canadians borrow more to cope with a higher cost of living. House prices have also continued to stay high and more expensive borrowing has meant any housing-related debt has become far harder to service.

Credit card debt is perhaps the biggest culprit. Half of all the respondents surveyed said that making their minimum credit card payments is preventing them from saving regularly. About a quarter of Canadians surveyed also found that they expect to take at least five years to pay off their existing debts. Since savings are such a key contributor to financial wellbeing, those years spent paying down debt instead of savings can be serious contributors to high levels of financial stress.

The survey found that of Canadians earning an income of over $100,000, around 30 per cent consider themselves financially stressed. That number is a bit shocking on the surface, but Tzanetakis uses it to emphasize that income is not the sole determinant of financial stress. High earners can live paycheque to paycheque too. While more income can help, there is a degree to which financial habits around spending and saving need to change to get people out of financial stress.

There are a few key steps that Tanetakis thinks employers and plan sponsors can take to help alleviate this stress. While he argues that this work begins with individuals and households, employers can help build savings plans for their employees. The NPI encourages employers to offer auto-deduction savings plans, either for retirement or emergencies. Matching funding for savings can be an even better incentive. Savings are generally found to be an effective means of alleviating financial stress and an employer helping workers save can go a long way.

While the survey doesn’t specifically explore the idea of pension security, Tzanetakis notes that pensions can function as a form of savings. If employees know they have some assets accumulating in a plan, they can feel less financially stressed.

There are efforts being made to manage these rising stress levels. Tzanetakis notes that many provincial governments are now teaching financial literacy or working to alleviate the housing crisis. He argues, though, that employers need to step up as well, because employees under financial stress bring that stress to work.

The survey found that many employees experiencing financial stress spend significant amounts of time at work trying to cope with their stress. NPI estimates that the lost productivity to financial stress costs employers around $54 billion per year. Tzantetakis says that number has doubled since 2021. Tzanetakis believes that this issue has gotten so dire that employers, as well as individuals and governments, need to be taking action now.

“We really believe that the where we're at today in terms of the levels of financial stress, it really is an all hands on deck,” Tzanetakis says. “It really starts with the individuals and their financial habits, but employers can help by supporting their employees in a number of ways. Governments may also need to start paying more attention to this and start thinking about comprehensive ways in which to assist Canadians, because this clearly is a trend that needs to be reversed.”