BMO Real Financial Progress Index shows Canadians’ financial confidence dips as inflation continues to rise

After more than a year of reporting steady confidence in their personal financial situation, Canadians are starting to show a decline in financial confidence according to the BMO Real Financial Progress Index, a quarterly measurement of consumer sentiment around financial confidence. Nearly one quarter (23 per cent) of Canadians see themselves as less financially secure than one year ago, a significant increase in pessimism compared to only three months ago (18 per cent), citing the rise in inflation and consumer costs as having a major impact.

Impact of inflation

During a time of record-high inflation across the country, almost two-thirds of Canadian adults (61 per cent) report that inflation has had noticeable impact on their personal finances. Almost half of Canadian adults (49 per cent) have reported reduced savings due to rising costs. The Index also found that:

• Canadians are more likely to cut general savings (36 per cent) than their retirement contributions (22 per cent).
• Gen Z (56%) and Millennials (62%) were most likely to make cutbacks to their savings than older generations.
• Men (24 per cent) reported being more likely to reduce retirement contributions than women (21 per cent).
• Younger Millennials (ages 25-34) were especially prone to reduce general savings (48 per cent).

“As the cost of everyday purchases, from groceries to gasoline, continue to rise across the country, it’s important for consumers to review and adjust their financial plan,” said Gayle Ramsay, Head, Everyday Banking and Customer Growth, BMO. “Now is a great time to seek advice from a financial expert on ways to successfully navigate this period of high inflation, be prepared for unexpected setbacks and ensure you’re on track to meet your financial goals, whether it be saving for a down payment or retirement planning.”

Increased cost of living

While housing costs remain the biggest barrier to financial progress (37 per cent), significantly more Canadian adults than last quarter also see monthly bills (up 4 points to 30 per cent) and credit card debt (up 2 points from last quarter to 23 per cent) as holding them back from making financial progress.

“The fastest and broadest inflation in three decades is forcing Canadian households to not just cut back on discretionary items, such as vacations, but also to alter purchases of necessities, in particular food,” added Sal Guatieri, Senior Economist, BMO.

How Canadians are offsetting increased costs of living

BMO’s Real Financial Progress Index found that eight-in-ten (81 per cent) Canadian adults plan to adjust their lifestyles in response to increased cost:

• 52 per cent of Canadians are changing how they shop for groceries. This includes opting in for cheaper items, avoiding brand names, and buying only the essentials.
• 52 per cent are either dining out less or consciously spending less when dining out.
• 34 per cent are driving less to offset the soaring costs of gas.
• 29 per cent are spending less on vacations or canceling them altogether.
• 23 per cent are taking measures such as canceling subscriptions to the gym, cable etc.

In addition to the changes Canadians are already making, BMO offers the following tips to keep up with the rising rates of inflation:

• Review and adjust your budget to incorporate inflationary prices.
• Review your ongoing expenses such as streaming services, cable subscriptions, etc. to determine if they can be reduced or eliminated. Use tools like the BMO Insights feature on our mobile app which makes it easy to manage subscriptions – this feature highlights if you have a new or higher subscription charge and makes it very easy to review and compare your monthly spending.
• Postpone big-ticket purchases. Some price increases may be transitory, in which case it may be worthwhile to wait.
• Review your monthly payments such as the homeowners’ insurance policy or auto policy to ensure it is appropriate and you are getting the most for your money.