Fifty percent of Canadians reported that they are $200 or less from facing insolvency, according to the latest MNP consumer debt index findings.
This percentage represents an eight-point increase compared to the previous quarter. The percentage of men facing this concern (45 percent of the group) skyrocketed by 13 points this quarter.
Thirty-five percent of respondents claimed to be insolvent at present. Canadians’ net personal debt rating also plummeted by 12 points.
"While interest rate cuts last year provided some initial relief from their financial concerns, Canadians are starting 2025 with a more pessimistic view of their finances," said Grant Bazian, president of MNP LTD, in a statement. "Holiday bills are squeezing household budgets. Additionally, economic uncertainty, compounded by the U.S. election and concerns about tariffs, may be causing anxiety for Canadians."
The index revealed that Canadians are increasingly pessimistic about their finances coming into 2025. Fifty percent of respondents were concerned about their ability to pay off debts, and only 27 percent anticipated an improvement in their debt situation by next year; 19 percent expected their situation to worsen.
Interest rate cuts in 2024 did not boost Canadians’ confidence, with 65 percent of respondents indicating that rates “desperately” needed to drop. Forty-six percent were worried about increasing interest rates driving them to bankruptcy.
Just 17 percent of Canadians felt prepared to cope with upticks in interest rates adding $130 to expenses, and 37 percent said that they were less capable of handling the additional cost than before.
“Many Canadians are already tightening their finances, reassessing budgets, and exploring cost-cutting measures to manage rising costs or debt repayment. Unfortunately, even substantial sacrifices may fall short of providing meaningful financial relief in some cases, despite lower interest rates,” Bazian said in a statement.
Concern about job security is another factor contributing to Canadians’ financial pessimism; 41 percent of survey respondents said they were worried about people in their households losing their jobs. Fifty-one percent of Canadians believed that unless they incurred more debt, they would be unable to cover living and family expenses for the next 12 months.
As of this quarter, respondents reported having an average of just $790 left over every month for unexpected expenses like auto repairs. Thirty-three percent were wary about their ability to handle unplanned costs, while 38 percent were skeptical about their ability to handle job loss, wage adjustments, or seasonal work.
“This decline in month-end finances leaves households vulnerable to unexpected expenses or the impacts of economic changes. For those already living paycheque to paycheque, any financial disruption could quickly escalate into a crisis,” Bazian said.
The consumer debt index decreased by 10 points to 79 points this quarter—the second-lowest level recorded in the index’s history. Ipsos collated the data for the index from December 6 to December 17, 2024; 2,003 Canadians who were at least 18 years old were interviewed for the survey.
Canadian insolvency firm MNP LTD is a division of the MNP LLP accounting firm.