How the recession can affect your family finances
Simply put, this means that for the last two quarters our economy has shrunk.
While many households may not be feeling the effects of a recession today, our lack of savings could mean many of us could face financial difficulties in the near future.
According to a recent report from the Bank of Montreal:
- 56 per cent of Canadians have less than $10,000 in emergency funds;
- 27 per cent have between $10,000 and $49,000; and
- Only 8 per cent have more than $50,000 set aside for a raining day.
Jeff Schwartz, executive director of Consolidated Credit Counseling Services of Canada, is encouraged that many Canadians are making an effort to put money aside, but fears those with little savings are going to be the worst off in a recession.
“When our economy begins to fail we often see significant job loss, coupled with a higher cost of living,” says Schwartz. “If you don’t have three to six months of savings put aside for emergencies, a recession could deliver a lot of financial damage.”
It is often difficult to understand how a recession can affect your household budget. Schwartz and the team at Consolidated Credit are here to take a closer look at the ways economic difficulties can affect your family’s financial health.
Paying the bills – Even though the national economy is on a downward slide, families are still required to pay the bills and meet their credit obligations. The good news is a recession may lead to less borrowing and more financial responsibility for many households – which in turn can lead to long-lasting money management skills.
The bare necessities – One of the best ways to protect your household finances during a recession, is to understand the difference between wants and needs. Paring your household budget down to the bare necessities may be difficult on some (or all) family members, but it will save you from dipping into your emergency fund right away.
The value of your home – During a recession, it is common for the value of real estate to fall. While the current Canadian housing market doesn’t reflect the status of our economy, it’s important to recognize that real estate is not always a safe investment in times of economic downturn. Be sure to also keep this in mind if you are considering borrowing against the value of your house.
Family life – When we think of recession, we tend to think in terms of dollars and cents, but another casualty of economic uncertainty is family life. A loss of income can often create stress in the household and cause damage to family relationships. Try to take the time now to budget as a family and have an open discussion about finances. If everyone is on the same page, you can all work together to weather the pending storm.
If you savings are already depleted and you are struggling to make ends meet, it’s time to ask for help. Give us a call at today to speak to a trained credit counsellor and find out how you can get your budget under control. You can also try our Free Debt Analysis online and a counsellor will reach out to you.