Most Influential Website Banner

Another day, another depressing headline -- don’t shoot the messenger. 

Yet another report is highlighting the defeating toll inflation is taking on the wallets and bank accounts of Canadians. 

TransUnion’s new Consumer Pulse study examined Canadian behaviours and attitudes towards their personal finances. The findings show that, while the majority of Canadians’ household income has stayed the same, their household finances were worse than planned -- a reflection of rising inflation. The Canadian pace of CPI hit 7% in August -- lower than in previous months, but still historically steep -- while the US measure hit 8.2% in its September reading.

More than half of Canadians surveyed (55%) say their income isn’t keeping up with inflation

Of the Canadians surveyed, 61% said their household income remained unchanged over the last three months, compared to increased (20%) or decreased (19%). What’s more, a total of 87% expected household income to stay the same or increase over the next 12 months, compared to 13% who expected it to decrease. A total of 25% of respondents said they will not be able to pay their current bills in full. 

interest rates

With sky-high levels of inflation continuing to remain a large concern for Canadian household due to ensuing price hikes, coupled with the anticipation of a potential recession, the study found that Canadians are reducing their spending and building up savings. Of those surveyed, 54% reported reducing discretionary spending over the last three months. 

“We are seeing wavering confidence among Canadians due to continued concerns around cost-of-living price increases,” said Matt Fabian, Director of Financial Services Research and Consulting at TransUnion. “More than half of Canadians surveyed indicated that inflation increases are outpacing their incomes. At the same time, increased interest rates are dampening Canadians’ appetite for taking on new credit. While most Canadians expect their household income to stay the same or increase, Canadians are taking a pragmatic approach to managing their household finances. Many are saving more and spending less, most likely to accommodate price hikes and anticipate the impact of a potential recession.” 

In addition to reducing spending, some Canadians are making other financially responsible choices in the face of the current cost of living. Of those surveyed, 21% paid down debt faster, 21% saved more money in an emergency fund, and 10% saved more for retirement. At the same time, however, 15% cut back on retirement savings, 10% increased their usage of available credit, and 9% dug into their retirement savings.

Not surprisingly, perpetually climbing interest rates have dampened Canadians' desires to take on more credit. While the vast majority (80%) of Canadians said they aren't planning to apply for new or refinance existing credit, responses differed by generation. Gen Z respondents indicated they were more likely to apply for credit (42%), while Baby Boomers were least likely to apply (7%). Nearly half (47%) of total respondents said rising interest rates will have a high or moderate impact on whether or not they will apply for credit over the next 12 months.

Of those who do intend to apply for new or refinance existing credit, more than half (53%) plan to apply for a new credit card in the next year. Among those respondents, other planned credit and loan activity in the next 12 months included things like new car loans (25%) personal loans (23%), and refinancing mortgages (18%).

To end things on the same depressing note as we started, while 87% of Canadian households expect their income to either stay the same or increase over the next 12 months, the TransUnion study findings indicate there is increased concern about the future. Around a third of Canadians expressed pessimism about their household finances over the next year.

Personal Finance