The Pending financial Storm.
The COVID-19 pandemic is devastating the Canadian economy and people’s financial stability.
The rebuilding of the economy is going to take a long time. The phased reopening means this is not a quick fix for those whose financial lives have been destroyed. After the dust settles, the payment deferral programs are lifted, collection practices resume, the government subsidies end, millions will be left unable to pay their rent, mortgages, car loans and credit cards.
Like the reopening of the economy, the financial impact will also be a phased approach. First, people will return to work but many on reduced hours and reduced income. Secondly, the government support programs will end. Third, the payment deferrals programs from the banks will cease. Finally, the collection practices will resume in full force. Unlike the shutdown of the economy which has dragged on for many months, the pending financial storm will arrive quickly, and it will be relentless. Many predict full collection activities to begin as early as September 1. This, of course, may change depending on how the reopening goes.
Who has been impacted the most?
This time it’s different than previous recessions, as women have been hit the hardest. As the hospitality and service industries have been most impacted, women have seen steeper job losses than men. Statistics Canada reports 1.5 million women lost jobs over March and April. Unquestionably, the hardest-hit industry is nursing homes, seeing both the highest numbers of cases and deaths, not only for residence but also the staff. This also has a gendered impact as most workers in care homes are women.
Childcare is another huge obstacle, as businesses start to reopen, parents without adequate childcare cannot return to work and what started as a temporary layoff could turn into a permanent one. The government has highlighted childcare as critical to the economic recovery and are looking at ways to help address this.
Another segment hit hard is millennials. Statistics Canada reports that employment is declining rapidly among young people. Again, heavily exposed to the service industry and many employed in lower-paying, causal positions. People accumulate wealth as they grow older and have more secure jobs and therefore, can weather the storm much easier than millennials. In addition to the financial turmoil, millennials are missing key life milestones like graduation that have always been taken for granted. This does not mean seniors are immune, far from it. Many feel that that they have been forgotten when it comes to financial support and have seen significant losses on their retirement accounts, or the need to access those accounts to survive, with little hope of recovering the losses or replenishing the funds before they are needed for retirement. People often refer to needing to ”dip into savings” to cover an emergency expense. For most this was not a dip, this is a full-blown, gold medal-worthy Olympic high dive, with triple pike.
The list goes on, small business owners, immigrants, it is hard to find a segment that hasn’t been impacted. For so many Canadians, job and financial uncertainty hangs over them like a dark cloud. The Canada Emergency Response Benefit (CERB) it is not enough to cover day-to-day expenses and unpaid bills and credit card debt is rising at a rapid pace. Only time will tell if additional programs will be implemented to stop the storm of financial hardship leading to insolvencies, or if the natural cause of events will take place leaving millions of Canadians facing bankruptcy and close to a decade of recovery.
There is action we can take to potentially avoid insolvency or at the very least become fully educated on the process and all options to deal with debt. Register for our Debt Bootcamp – It’s a series of 10 emails to help navigate options to deal with debt.
Also, we have a free eBook available, Beating the Debt Game – this will provide crucial education and advice during these difficult times.
Becoming educated will help remove the stress, identify when you need more drastic action to deal with your debt and how to obtain the professional advice when you need it the most.