New data from the Credit Counseling Society (CCS) reveals a growing reliance on credit and high-interest loans among Canadians aged 18-34. Despite cutting expenses, budgeting, and taking on extra work, many young people are struggling to afford basic necessities amid financial uncertainty.

Over recent months, the cost of consumer goods, food, clothing, and services in Canada has steadily increased. Economic activity in the country declined for two consecutive months due to tariff and trade tensions with the US, according to data from July.

A survey of 1,700 young Canadians by debt management and financial recovery firm Harris & Partners found that nearly 60% said their income doesn't cover essential expenses like rent, groceries, and utilities. This financial strain is exacerbated by high living costs and stagnant wages.

With insufficient income, many young people are increasingly dependent on short-term, high-interest credit, buy-now-pay-later programs, and even payday loans just to cover essentials like food and transportation.

The Bank of Canada held its key interest rate at 2.75% in late July. Observers say this isn't good news for young Canadians already burdened by debt.

"Many young Canadians are already drowning in debt. They're taking out small loans just to cover essential needs, but those debts will accumulate over time," warned Peta Wales, CEO of CCS.

College Street in Toronto, Canada in April. Photo: Reuters

College Street in Toronto, Canada in April. Photo: Reuters

The CCS report shows unsecured debt for Canadians under 35 has risen 9% since last year, now averaging over 24,000 USD. Over 40% of this debt comes from financial companies or buy-now-pay-later (BNPL) services, while over 33% resort to high-interest payday loans. These figures have steadily increased throughout the past year.

"We're seeing young Canadians using credit cards for everything from textbooks to toiletries," said Mason Cox, a senior counselor at CCS. "The problem is this type of borrowing feels normal, until it doesn't."

CCS also reported a 7% increase in clients under 35 since 2023, now representing 25% of their total clientele. Most are renters, often without stable employment. The highest demand for loans comes from Edmonton, Vancouver, and Calgary, cities with high rental costs.

Canada's unemployment rate was 7% in May, with over 1.6 million people out of work. Meanwhile, housing costs, including rent and mortgage payments, rose 2.9%, after consistently exceeding 3% growth for over four years.

Carolyn Whitzman, a housing expert at the University of Toronto, believes Canadian housing prices are too high to be corrected to improve affordability. "If a house goes up over 300% and then drops 20%, that doesn't really help you," she said.

Observers note the convenience of credit cards and online loans, often just a few clicks away, is a double-edged sword. Many don't realize they've overspent until they're juggling five or six debt payments at once.

"For many, quick loans seem like the easiest solution. But every choice has a price," cautioned Isaiah Chan, a service leader at CCS.

A woman reads a book outside the University of British Columbia in Vancouver, Canada, on 14/4. Photo: Reuters

A woman reads a book outside the University of British Columbia in Vancouver, Canada, on 14/4. Photo: Reuters

Many young people are turning to family for support. According to CCS, there's a growing trend of young Canadians asking their parents for help with mortgage payments.

A report from the Mortgage Professionals Canada (MPC) revealed that 70% of recent homebuyers couldn't have purchased a property without down payment assistance.

Statistics show older Canadians are carrying more debt, but without a corresponding increase in real estate transactions or home renovations. This suggests these debts are being used for other purposes, largely to support their children.

A 2024 report by the Canadian Imperial Bank of Commerce (CIBC) shows intergenerational wealth transfer is becoming the norm, with 31% of first-time homebuyers receiving "financial gifts" from their parents. These gifts have increased significantly, from under 60,000 USD in 2015 to over 100,000 USD today.

Duc Trung (According to WP Canada, Financial Post, CBC)