Despite some good news on inflation, a new survey shows Canadians are feeling more financial stress than two years ago. Anne Gaviola reports on how the high cost of living and rising interest rates are squeezing household budgets.
While 2024 has seen a drop in monthly inflation, with prices rising below three percent annually for the first four months, Canadians are still feeling the pressure. The Bank of Canada’s efforts to bring inflation down from its peak of 8.1 percent to closer to its two percent target have made progress, but financial stress remains high.
FP Canada, representing Canadian financial professionals, released its 2024 Financial Stress Index based on a survey conducted in late February and early March. The survey found that 44 percent of respondents cite money as their leading source of stress, up six points from two years ago. Higher grocery prices (69 percent), inflation (60 percent), and housing costs (52 percent) are the main contributors to this stress.
An Ipsos poll for Global News in April supports these findings, showing 83 percent of respondents reported higher grocery bills, with an average increase of $78.90 per week. Statistics Canada’s April inflation report showed a further easing, with overall annual inflation down to 2.7 percent from 2.9 percent in March. However, grocery prices are still 21.4 percent higher than in April 2021, and rents continue to rise at 8.2 percent year over year.
Personal finance expert Rubina Ahmed-Haq explains that the cumulative effect of rapid price increases is driving financial stress. The disruptions from the past three years, including job losses and business closures during the pandemic, are still fresh in people’s minds. The swift rise in interest rates and inflation has further compounded the situation.
“Young adults are feeling the pinch the most,” says Ahmed-Haq. Half of Canadians under 35 report money as their top stressor, and 72 percent say financial stress negatively impacts their lives, with many facing anxiety and depression.
Finance Minister Chrystia Freeland noted that wage growth has outpaced inflation for the past 15 months, with April’s average hourly wage rising 4.7 percent year over year. But Ahmed-Haq points out that wage increases have not kept up with the high inflation levels seen in 2022.
The Bank of Canada’s rapid interest rate hikes have made borrowing more expensive, adding to housing costs for many. Meghan MacPherson, a financial planner, says that rising debt payments are a significant part of the stress Canadians are feeling. More Canadians are focusing on paying off debt, with 24 percent planning to pay off credit card debt in the next year, up from 19 percent two years ago.
FP Canada’s survey shows that 91 percent of respondents are taking steps to reduce financial stress. Expense tracking, debt repayment, and increased savings are the top actions. Ahmed-Haq advises younger Canadians to start small with savings and build up over time, stressing the importance of sustainability in financial planning.
There is a glimmer of hope, with 50 percent of respondents feeling more optimistic about their financial future, up from 47 percent last year. Ahmed-Haq believes that while the current economic challenges are tough, Canadians will adapt and find ways to manage their finances in the long term. “I don’t think that it’s hopeless,” she says. “We’re just in a very acute time, and we’re figuring out what our economy will look like for the next 10 to 15 years.”