Almost 30 per cent can't afford one decent meal a day while a quarter of them are falling deeper into debt, according to a survey of 1700 of the charity's clients.
Major Andrew Craib said the results, released in the lead-up to the Salvos' Red Shield Appeal, showed parents in particular were becoming increasingly desperate.
About half the people represented in the survey were struggling to support dependent children.
"The great concern for me is the social exclusion that starts to take place," he said.
"Children will come home with an invitation to a birthday party and (parents) will think, 'Well, they're not going' because they don't want the children to be embarrassed because they don't have a present to take or nice clothes to wear."
More than one third or 36 per cent of respondents could not afford to pay for their children's school outings or activities.
One person surveyed said: "We lost everything in the flood less than 12 months ago and have not recovered emotionally or financially. And our relationship is suffering."
Mr Craib said this was typical.
"In an economic downturn or a natural disaster, the people that the Salvos see are often the first to be affected and the last to recover," he said.
Nearly all the survey's respondents, 94 per cent, had no savings, and 87 per cent had no home contents insurance.
The charity's need for funds was "desperate", he said, and would be stretched as the weather got colder and utility bills began rising.
The annual doorknock appeal takes place this weekend, May 19 and 20, with a fundraising goal of $81.5 million.
For further information visit: http://salvos.org.au/