Survey reveals inflation's toll on spending
Nearly one-third of Canadians (30%) intend to cut back on spending in 2025 as the cost-of-living continues to climb, according to the latest BMO Real Financial Progress Index.
The survey found that 30% of Canadians plan to minimize spending in 2025, reflecting widespread financial concerns. Nearly half (46%) of respondents said the rising cost-of-living had impacted their financial resolutions for the new year, marking a 4% increase from 2023. Inflation (50%) and fears of an economic recession (42%) are among the top drivers of this anxiety.
"The new year marks a fresh start for self-reflection and improvement, and we want to empower Canadians to focus on building good habits and making real financial progress by encouraging them to get a head start on defining their financial goals," said Anthony Tintinalli, head of specialized sales at BMO.
Top sources of financial stress include:
- Concerns about overall financial stability (82%)
- Fear of unexpected expenses (82%)
- Housing costs (73%)
- Family-related expenses (67%)
- Difficulty managing monthly bills (64%)
Despite these challenges, 72% of Canadians remain optimistic about their financial prospects for 2025, and 37% feel more financially secure than they did a year ago. Notably, 87% believe they are making tangible financial progress.
The survey also revealed that 21% of Canadians plan to set financial goals or budgets for the coming year. Among those who have already established goals, the priorities include saving for retirement (58%), vacations (47%), and debt reduction (40%).
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However, many Canadians face gaps in their financial planning. Only 33% of respondents currently have a comprehensive financial plan, and 59% lack a household budget for the year. Over a third (36%) are considering major purchases in 2025, but nearly a quarter (24%) plan to modify these purchases to adjust for rising costs.
BMO Economics predicts some relief in 2025 as the Bank of Canada continues to lower borrowing costs. Since June 2024, the central bank has cut its overnight rate by 175 basis points, and another 75 basis points of reductions are expected in the first half of 2025. However, longer-term borrowing costs may decline only slightly as economic activity begins to recover.
"As we look forward to the new year and its possibilities, Canadians can work with a financial advisor to build a personalized plan and take advantage of convenient online banking tools to help monitor their budgets and establish good financial habits that will set your financial future up for success," Tintinalli said in the report.
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