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June 09, 2023 | By: Himank Bhatia

Navigating the Financial System as a Low-Income Canadian

Credit Counselling | Low Income | Personal Finance

Do you ever feel like your income just doesn’t take you far in Canada? 

Maybe you feel you’re spending too much on groceries. Or you can’t afford to put anything into your savings account after debts and bills. 

We see every day that life is getting increasingly more expensive for everyone, but these issues are just the tip of the iceberg for the challenges low-income Canadians face. Data shows that people with lower incomes have been impacted most severely by the rising costs of living, in part due to gaps in access to affordable, appropriate and trustworthy financial help.

What makes someone “low income?” According to a national survey by the Financial Resilience Institute, the definition is:

  • Individuals with an annual income under $20,000
  • Multi-person households with an annual income under $50,000

About 10.6% of Canadians were considered low-income in 2021, up just over a percentage point from 2020. And if 10.6% doesn’t sound high to you, consider that it adds up to 2.32 million Canadians. 

Credit Canada’s CEO Bruce Sellery recently spoke with Prosper Canada’s CEO Liz Mulholland about the company’s latest financial help gap project report. Prosper Canada is a charity dedicated to improving economic opportunity for Canadians.  

The report outlines the unique challenges faced by low-income Canadians and identifies eight critical services for financial health. Research demonstrates that having access to appropriate financial assistance is directly connected to improved financial well-being. Unfortunately, not everyone has access to the necessary financial support and guidance they need.


We’ll walk through some of the report’s findings and the episode’s highlights. 


Top Challenges Low-Income Canadians Face in the Financial System

1. They’re Underbanked

Low-income Canadians might have a bank account, but they might: 

  • Rely on “high-cost” financial alternatives like payday loans
  • Face barriers accessing financial services
What do those barriers look like? 

If we’re talking about Canadians in rural areas, it could be the distance and lack of affordable transportation. Additionally, banks require certain identification documents that could act as barriers to refugees, people experiencing homelessness and housing issues, Indigenous peoples, or those recently released from jail. 

Plus, training is an issue. Financial professionals aren’t always trained on the unique issues lower-income Canadians face, meaning they don’t tailor their services to them. The exception? Pigeon Park Savings and a few community-based organizations, who offer free tailored financial services — but it’s not enough. 

Even the private financial sector doesn’t really accommodate lower-income Canadians:

“There’s no real strong business case to actually design products for lower-income consumers because there are very few profit-making opportunities,” said Mulholland.

2. They Don’t Trust Financial Institutions

Mulholland describes how many lower-income Canadians have had negative experiences with financial institutions — especially if they’re also racialized, marginalized, or Indigenous.

In some cases, lower-income Canadians might display physical characteristics that result in judgments and discrimination. The result is a lack of trust in financial bodies. 

Bank tellers, security guards, and other financial professionals often don’t feel as comfortable or eager to serve a lower-income Canadian with a visible issue. 

“It might be because they have a visible disability… elderly… Some people may be sleeping rough; they don’t look very nice, their clothes are dirty. A security guard might not let them inside the establishment,” explains Mulholland. 

The report identified racialized and Indigenous groups as less likely to speak to financial professionals because of that discrimination. Plus, Indigenous Peoples experience mistrust around colonization and policies that erase their voices and histories. 

3. They’re Using the Wrong Savings Products

Building on the point of being underbanked, lower-income Canadians don’t always receive the best advice from financial institutions. Case in point — many lower-income individuals have been told that they should have RRSPs: 

“If your income is under $50,000, you should be saving in a Tax-Free Savings Account (TFSA) — otherwise, when you retire, you’ll see all your seniors’ benefits get clawed back and taxed more heavily,” explains Mulholland. 

Yet uninformed bank professionals still recommend RRSPs for lower-income Canadians: 

“We have this disconnect between having distinct financial circumstances and needs that really impact their ability to find relevant financial help, and mainstream financial advice and guidance designed for people with different needs.”


8 Financial Help Priorities for Lower-Income Canadians

So, how do we address these challenges? The report offers eight areas of financial help that could enhance accessibility and relevance to financial services for lower-income Canadians: 

1. Comprehensive Financial Assessment

Awareness is the first step — that’s why our certified credit counsellors walk clients through their entire financial picture to assess the best steps forward. A comprehensive financial assessment helps low-income Canadians understand their scenario. Here’s what the assessment looks at: 

  • Balance sheet (assets + liabilities) 
  • Monthly budget and spending
  • Financial attitudes and behaviours
  • Financial goals surrounding savings, debts, credit building, income benefits, and tax filing

The report describes a financial assessment as a “vital precursor” to a financial plan: 

2. Financial Plan

Having a sound financial plan can set you up for success. A financial plan is a documented path toward your short-term and long-term financial goals, including financial decisions, budgeting choices, and savings products. You can adjust your plans to meet your changing needs, like a new income situation or updated goals. 

Sure, you can ask your bank’s financial advisor to help you create a financial plan. But revolving doors of staff limit the opportunity to check in and maintain that plan. Plus, the report’s findings show that financial planners require more training to best serve lower-income Canadians. 

Financial apps can help, but some lower-income Canadians have language barriers that impede them from making full use of those apps. 

3. Budget and Spending Plan

Budgeting is more important for lower-income Canadians because of their limited surplus income. Meaning? They have less to rely on in a financial emergency. So this service would support them by:

  • Analyzing income and spending
  • Creating a budget plan
  • Offering relevant advice and coaching to stick to that budget
  • Recovering from financial setbacks

4. Urgent Financial Problem Resolution

Lower-income Canadians often face financial crises — more often than the average-income Canadian. Urgent financial services might include navigating credit complaints, compiling documentation, financial help service referrals, and generally advocating and representation. 

5. Access to Appropriate Financial Services and Products

Someone making $100K per year might benefit from one type of financial service — but that doesn’t mean that same service would benefit others with different income situations. 

Lower-income Canadians have unique goals, priorities, and risks, and a bank’s sales incentives might cause them to overlook those unique attributes. 

“We’ve run large-scale pilots across the country of community-based service providers that work with lower-income people every day, who have been trained to provide these financial help services.” 

Everyone’s financial situation is different — that’s why Credit Canada offers tailored, personalized services to support Canadians in accessing the best financial services to meet their unique needs. 

6. Savings Goals

Remember how “wrong saving vehicles” was a common challenge for lower-income Canadians? The Prosper Canada Report identified support in reaching savings goals as a vital service, which could include: 

  • Personalized coaching and advice on saving
  • Retirement planning
  • Income and savings assessments
  • Access to relevant grants and subsidies

7. Debt Management

Many lower-income Canadians in debt spend about 31% of their income on debt payments. Tack on the ever-increasing cost of rent, gas, and groceries, and it’s hard to have much left for savings. That’s why debt management is so vital for lower-income Canadians. The report identifies the following financial support needed to address debt: 

  • Access to debt relief and assistance programs
  • Referrals to credit counsellors, community supports, licensed insolvency trustees, etc. 
  • Establishing a realistic debt management plan
  • Negotiation with creditors to minimize debt obligations

A credit counselling session is a great first step in managing and tackling debt. Certified credit counsellors help you identify different options to meet your needs— completely confidential and free of charge. 

8. Access to Income Benefits and Tax Filing

About 10% to 12% of Canadians don’t file their taxes — and that’s even higher for lower-income Canadians. The report found that 20% of lower-income Canadians don’t currently file their taxes. This is a big loss since tax filing is a pathway to accessing government benefits and subsidies to beef up their income. 

Mulholland’s community-based services supported these Canadians with tax filings. The result?

“If they accessed tax filing and benefit help, their incomes went up quite a bit, on average about $3,600,” said Mulholland. “They were achieving a financial outcome as a result from the service, even from a brief interaction.”

Apart from that, Mulholland cites that 95% of the service recipients would recommend them to someone else, meaning that the program is working. 

Credit Canada Supports Low-Income Canadians with Counselling

Prosper Canada’s report reveals just how vital the right financial support is for low-income Canadians. While financial institutions have more work to do, the report identifies relevant forms of support to help lower-income Canadians achieve more sustainable financial health.  

Credit Canada can help with confidential, non-judgmental, and tailored credit counselling services. 

If you could benefit from free credit counselling to help manage your finances, book a credit counselling session today.

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