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Canadian workers are feeling pinched when it comes to their finances, with a growing number saying they are living paycheque to paycheque.Fred Lum

Canadian workers are feeling pinched when it comes to their finances, with a growing number saying they are living paycheque to paycheque.

An annual survey of employees by the Canadian Payroll Association (CPA) shows more people are overwhelmed by their debt, are saving less and would face real hardship if their paycheque was delayed by a single week.

"Even though the Canadian economy did well relative to other G7 countries in the past decade, many employed Canadians say they are having a difficult time making ends meet," said Marie Lyne Dion, chair of the CPA, which is releasing the survey Wednesday.

Most of the survey's measures of financial health have deteriorated this year, with more employed people planning on delaying retirement amid eroded savings.

And it's not the only indicator to suggest households are getting squeezed. A separate Bank of Montreal poll released this week found a growing number of Canadians have only enough savings to cover one month or less in case of an emergency.

Subdued real wage growth and muted hiring have kept a lid on earnings. Meanwhile, house prices continue to climb and inflation has ticked above the 2-per-cent mark for four months in a row. And while consumers have kept spending this year, they appear to be running up debts to do so.

Just over half, or 51 per cent, of the 3,211 employees surveyed by the CPA said it would be tough to make ends meet if their paycheque was delayed by one week. That was up from an average of 49 per cent over the past three years. Those surveyed this year are also living closer to the edge, with more than one quarter of respondents saying they probably couldn't pull together $2,000 in the next month if something urgent arose, such as a medical emergency.

More people reported they're saving just 5 per cent or less of their pay, while of those trying to save, fewer said they're actually able to do so. One of the reasons they can't was increased spending, said Patrick Culhane, CPA president, with 44 per cent saying they're spending all or more of their net pay on their children, home renovations and energy costs.

Canada's most recent GDP data showed a slide in savings. The country's household saving rate tumbled to 3.9 per cent in the second quarter – the lowest level since 2010 – from 5 per cent in the prior quarter as consumption grew at a faster rate than disposable income. (By contrast, in the early 1980s, the saving rate was above the 15-per-cent mark).

Drawing down on savings to support consumption "may boost GDP growth in the near term but it's unsustainable – when rates move higher and crimp credit demand, real income growth will need to counteract the drag from higher rates," said Emanuella Enenajor, senior Canada economist at Bank of America Merrill Lynch in a recent note.

The Bank of Canada, in its most recent monetary policy report, said risks around household imbalances are still "elevated." Its financial system review showed the chief risks are in the housing market – with the threat of a sharp correction in house prices – along with household indebtedness, which leaves people vulnerable to a sudden job loss, or a sharp rise in interest rates.

More people – 39 per cent – said they feel overwhelmed by their level of debt, up from the average of 32 per cent in the past two years, the CPA survey showed. And 12 per cent of respondents said they don't think they will ever be debt free.

Softer finances was causing more people to consider delaying retirement. Eight in ten, or 79 per cent, of respondents expected to delay retirement until age 60 or older, up from 70 per cent over the past three years. The top reason cited for why they were delaying was that employees aren't able to save enough money.

When asked what the first step would be to improve their financial situation, the most common answer was to earn more. Spending less was the next most-frequent response.

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