Most Canadians feeling good about their personal finances – for now

High inflation and rising interest rates contributing to drop in consumer optimism over next year, finds poll

Most Canadians feeling good about their personal finances – for now

While most Canadians (59%) feel good about their personal finances right now, only 40% are hopeful about their household finances over the next 12 months, according to TransUnion's most recent Consumer Pulse study.

A sense of waning financial confidence is being fueled by record-high inflation and rising interest rates, and if affordability issues continue to be a problem, this might cause a further decline in consumer confidence.

Furthermore, the study shows that 48% of Canadian households claimed to have cut back on discretionary spending in the last three months, and 49% of Canadians looked to have changed their debt- and savings-related behaviors.

Included in this are individuals who said they increased their emergency fund savings (20%), reduced their retirement savings (14%), or expedited their debt repayment (15%) over the previous three months.

Many customers predict higher spending on bills, healthcare, and digital purchases soon. Canadians also voiced growing concern about their capacity to pay their expenses, with 28% saying they won't be able to fully repay their present debts or loans.

“Canadians came out of the depths of the pandemic in relatively good financial shape, but we are starting to see some cracks in consumers’ financial confidence,” said Matt Fabian, director of financial services research and consulting at TransUnion.

“Despite being bullish about their current household finances, Canadians are feeling less confident about their financial outlook and ability to keep up with their bills. Concerns around increases in the cost of living, fueled by rising inflation and interest rates, are shifting spending and saving behaviors as Canadians brace for what’s ahead,” Fabian added.

Although Canadians are optimistic about their current financial condition and expected future income, they are growing more worried about their financial prospects.  

As concerns about inflation and affordability increase, the majority of Canadians (60%) expressed pessimism about their household finances over the upcoming year. Considering this, 58% of Canadians predicted that their household income will remain the same over the coming year, while 31% predicted an increase and 11% predicted a decline.

Canadians cut back on their consumption as concern regarding inflationary and interest rate pressures persisted. Over the past three months, almost half (48%) of Canadians said they had scale back on discretionary expenses like eating out, vacation, and entertainment.

A large proportion of Canadians said they were concentrating on building their savings and paying off debt, while a smaller proportion said they were expanding their credit lines and/or dipping into their retirement funds to help manage cash flow.