One in ten Canadians say their income doesn't cover basic living costs

A growing number of Canadians now see living paycheque to paycheque as their financial reality, according to a new survey from H&R Block Canada.  

The results reveal that 85 percent of respondents view this as the new norm—an increase from 60 percent who said the same in a similar study conducted in 2024. 

The survey shows that the rising cost of living continues to erode savings habits. While the long-standing guideline suggests setting aside 20 percent of income, Canadians on average save just 7 percent.  

Only 18 percent of respondents said they save around 20 percent or more of their paycheque.  

In contrast, 21 percent reported saving around 10 percent, and 25 percent put aside about 5 percent.  

One in ten Canadians stated their paycheque does not even cover basic living costs. 

The pressure to meet immediate needs has had an impact on long-term financial planning. Nearly half—46 percent—say they are unable to save for goals such as retirement or buying a home.  

One in three Canadians reported they would rather enjoy spending their money now, as they believe home ownership is out of reach for the foreseeable future.  

Looking to 2025, 78 percent expect to have even less money to allocate to savings due to the rising cost of day-to-day living. 

Concerns about savings capacity remain widespread. The survey found that 74 percent worry they are not setting enough aside, and 62 percent feel they have too little left over from their paycheque to build savings. At the same time, the burden of unexpected expenses remains a concern.  

Fifty-six percent of Canadians worry they would need to rely on debt or credit cards rather than savings if faced with an unplanned financial event—such as appliance replacement, home repairs, or dental costs.  

In practice, 48 percent already use credit cards for large purchases instead of drawing from savings, while 17 percent rely on installment payment options such as buy now, pay later plans. 

Although 54 percent of Canadians feel good about their current financial situation, 46 percent do not share that sentiment. Many still struggle despite earning decent incomes.  

According to the survey, 51 percent say that even with a reasonable salary, making ends meet remains difficult. 

Additionally, 81 percent are concerned that their income is not keeping up with the cost of living. 

Tax expert Yannick Lemay of H&R Block Canada acknowledged the financial challenges facing many households.  

“While many Canadians hold a mix of tax-friendly savings accounts, it's clear that Canadians are feeling the financial strain of not having enough money left from their paycheque to put into savings, given the high cost of living,” said Lemay. 

Canadians report several motivations behind their savings efforts. The top reasons include preparing for unexpected expenses, avoiding reliance on debt, and saving for retirement.  

According to the survey, 72 percent of Canadians save to cover unforeseen costs, 68 percent to avoid borrowing through credit cards or loans, and 59 percent to build retirement funds.  

Other motivations include earning interest on savings (47 percent) and having money to spend on things like vacations or vehicles (43 percent). Just 19 percent said they are saving toward buying a home.  

However, the motivation to save for a home shows stark differences by age group.  

While 46 percent of 18 to 34-year-olds prioritise saving for homeownership, only 16 percent of those aged 35 to 54, and just 4 percent of those over 55, report doing the same. 

Despite the low rate of saving, many Canadians expect a tax refund in 2025. Sixty-five percent say they anticipate receiving one, up significantly from 36 percent the previous year. However, many remain uncertain about the tax benefits available to them.  

More than one in three respondents—37 percent—say they do not feel they have a good understanding of the tax credits and benefits for which they may be eligible.  

“The good news is that 65 percent of Canadians expect a refund this year, up from 36 percent last year, of which a significant portion is likely due to investing in tax-friendly savings plans such as RRSPs,” said Lemay. 

Canadians hold a variety of savings and retirement accounts, which they contribute to when possible.  

The survey found that 52 percent have a Tax Free Savings Account (TFSA), 45 percent use high interest savings accounts at banks or credit unions, and 35 percent contribute to a Registered Retirement Savings Plan (RRSP).  

Some also use First Home Savings Accounts (5 percent) or keep cash at home (14 percent). 

According to Lemay, contributing to tax-friendly savings accounts can have dual benefits.  

“Beyond building up saving for your long-term financial security, putting money into tax-friendly savings helps reduce your taxable income and puts money back in your pocket,” he said.  

Lemay gave the example of someone earning $70,000 who contributes $10,000 to their RRSP, thereby reducing taxable income to $60,000. At a 30 percent tax rate, this would amount to $3,000 in tax savings while contributing to long-term savings.  

He added that contributing $8,000 to an FHSA on the same income could result in $2,400 in tax savings. 

“If you to do both, your total tax savings would be $5,400 in your pocket,” Lemay explained. 

H&R Block outlines several savings strategies that can assist Canadians in building a financial buffer.  

The First Home Savings Account (FHSA), introduced in 2023, allows individuals to contribute up to $8,000 per year and $40,000 over the lifetime of the plan, with contributions reducing taxable income and withdrawals for home purchases remaining tax-free.  

The RRSP enables tax-deductible contributions up to 18 percent of income in 2024, with taxable withdrawals permitted at any time.  

The TFSA, which now allows a $7,000 annual contribution for 2024, offers tax-free earnings on investments.  

Canadians may also benefit from other plans such as the Registered Education Savings Plan, Registered Disability Savings Plan, Workplace Pension Plans, and Pooled Registered Pension Plans. 

Methodology

The online survey, commissioned by H&R Block, was conducted from February 12 to 13, in both French and English, with a nationally representative sample of 1,790 Canadians who are members of the Angus Reid Forum. The margin of error for a sample of this size is estimated at +/- 2.3 percentage points, with a confidence level of 95 percent.