Majority of Canadians are adjusting financial plans amid growing concerns about inflation and the economy: BMO Real Financial Progress Index

BMO’s latest Real Financial Progress Index reveals that as two-thirds (66 per cent) of Canadians have adjusted their financial goals as a result of concerns about the economy, 77 per cent of Canadians wish they knew more about topics including saving and investing (50 per cent), retirement planning (35 per cent), budgeting (30 per cent), credit scores (22 per cent) and home buying (19 per cent).

“While CPI inflation has fallen sharply from four-decade highs of 8.1 per cent last summer, it’s still above 5 per cent in February, squeezing family budgets. Inflation anxiety and recession fears have spurred Canadians to save more of their income, with the current savings rate of 6 per cent more than double the rate prior to the pandemic.”

– Sal Guatieri
Senior Economist, BMO

71 per cent of Canadians reported increased concerns about inflation within the last three months. While the majority (72 per cent) of Canadians believe they are on track towards meeting their financial goals, growing concerns of a possible economic recession has prompted many to adjust their financial plans including trimming down their monthly expenses (40 per cent), delaying big purchases such as buying a home or car (29 per cent) and/or allocating more money to savings (22 per cent).

“As many Canadians adapt to financial pressures from rising interest rates, inflation and growing economic uncertainty, improving your financial literacy is the best strategy for building greater resilience from life’s expected and unexpected events. Understanding how to build and adjust your financial plans during times of uncertainty can empower you to make Real Financial Progress towards your immediate and future goals.”

– Gayle Ramsay
Head, Everyday Banking, Segment & Customer Growth, BMO

Changing course in the face of headwinds

Among the generations most concerned about inflation were Gen X Canadians (ages 45 to 54), where 78 per cent said rising consumer costs have significantly impacted their personal finances. This was followed by younger Millennials (ages 25 to 34) at 76 per cent, Gen Z (ages 18 to 24) at 74 per cent, older Millennials (ages 35 to 44) at 71 per cent and Boomers (ages 55 to 64) at 70 per cent.

In response to concerns about the economy, Gen Z (80 per cent) and younger Millennials (78 per cent) were the most likely to adjust their financial plans. Nearly half of younger (48 per cent) and older Millennials (46 per cent) have trimmed their monthly expenses in the past three months – more than any other generation. Meanwhile Gen Z is the most likely to delay making big purchases (39 per cent); members of its cohort are allocating more funds to savings (35 per cent).

Financial literacy is a lifelong learning

The quarterly survey also explores the measures Canadians are taking to improve their financial literacy at all life stages:

• Family Ties: More than half (55 per cent) of Canadians report their family’s approach to spending and investing has affected how they are saving and spending their money.
  • 59 per cent of Canadians reported having no conversations about budgeting, financial planning or similar topics while growing up.
  • 66 per cent reported that their family played an important role in helping them achieve their financial goals.
    
    
• Continued Education: While the majority (72 per cent) of Canadians reported that their financial literacy has improved as adults, approaches differed by generation. 
  • Boomers (34 per cent), Gen X (28 per cent) and Canadians over 65 years (39 per cent) are the most likely to work with a professional advisor, while Gen Z (27 per cent) and younger (42 per cent) and older Millennials (31 per cent) prefer connecting with their friends, family and/or partner to learn more about financial planning.
  • Nearly a third of Gen X (30 per cent) and younger (34 per cent) and older Millennials (31 per cent) read books and watch programs about financial planning to improve their financial literacy; only a quarter of Gen Z (25 per cent), Boomers (27 per cent) and Canadians over 65 years (23 per cent) do so.
    
    
• Financial Literacy Curriculum: Among the 77 per cent of Canadians with the desire to learn more about personal finance, Gen Z (93 per cent) and younger Millennials (88 per cent) were the most interested in learning more about topics including saving and investing, budgeting, credit scores and homebuying.
• Knowledge Powered Progress: While financial confidence among Canadians has declined by 5 per cent since last year (75 per cent) and a third (35 per cent) report they are making real financial progress, eight in 10 (82 per cent) Canadians report actively taking steps to improve their financial situation.

 

“Financial literacy is a lifelong journey of learning. Whether you are getting started or looking to advance your knowledge and skills, seeking advice and partnering with a professional advisor or planner can help you understand the different strategies available and develop a personalized financial plan that will give you the confidence to make real progress towards your goals,” said Ms. Ramsay.

BMO offers tools and resources to help customers build their financial literacy, monitor their financial plans and make Real Financial Progress:

• • BMO CreditView: Customers can quickly and easily check their credit scores and access new tools and advice to help manage their credit profile online and on mobile.

• • BMO Insights: To save more, monitor spending and account values, and spot unusual activity, 25 BMO Insights are available to provide customers free, quick and personalized pictures of their daily spending to help them make good spending decisions. Some popular online insights include:
    • CashTrack: Using Artificial Intelligence, these insights monitor customers’ cash flows and lets them know if they will run out of money in the next seven days.
    • Spend Categorization: These insights notify customers when there has been a significant increase in a specific spending category or if a free trial has expired.

• • BMO Savings Amplifier Account: To help make savings easy and automatic, BMO’s new Savings Amplifier Account offers no monthly fees, a competitive interest rate and unlimited no-fee transfers to other BMO accounts. In addition, its digital Savings Goals feature enables customers to set, track and manage their financial goals.

To learn more about how BMO can help customers make financial progress visit www.bmo.com/main/personal.