Rising interest rates and an increase in the cost of living in Canada are having a significant impact on a large proportion of its population and firms. As Canadian consumers see their wallets emptying faster, it has also emerged that confidence in their financial future may be withering as a result.
Released annually, the RBC ‘Financial Independence Poll’ looks to understand what people in Canada are thinking about their current and future financial situations. The royal bank’s 2023 poll reveals that Canadians aged 18 to 34 are now much less confident about their financial future, as a result of the impact of inflation on their day-to-day lives.
Confidence levels for young adults plunged from 31 per cent last year to 18 per cent in the most recent survey. A concerning majority displayed concerns about their cash flow (77 per cent). The factors most underlining cash flow anxiety were: income being too low (46 per cent); fixed expenses being too high (35 per cent); and unexpected expenses (27 per cent).
Compounding the issue, 52 per cent of survey respondents said they were not prepared for the impact rising costs and inflation is currently having on them. Forty-three per cent said that they didn’t anticipate how the current financial situation would affect their ability to pay for basic necessities.
Over a third of respondents (34 per cent) said that they were “already living paycheque to paycheque” prior to price increases. Already low, slow-rising, incomes previously stretched to the max have not kept pace with rising prices.
How do young Canadians plan to respond?
As the impacts of inflation on everyday costs hit home for the average Canadian, it appears many are keeping a closer eye on their finances. The RBC poll found that those paying more attention to day-to-day living expenses jumped to 62 per cent – compared to last year’s 48 per cent.
Managing debt also rose from 27 per cent to 34 per cent in 2023’s results. Plans to invest more also appear to have risen on many Canadian’s lists of priorities.
Almost one-third (30 per cent) cited building their investment portfolios as a key financial priority, and whenever they can do so, the majority (62 per cent) of these respondents are setting aside money to contribute to those portfolios. Almost half (47 per cent) indicated they were willing to pay fees for the opportunity to gain a better return on their investments.
Stuart Gray, director of the financial planning centre of expertise, RBC, said: “Even in the midst of coping with the impact of inflation today, it’s good to see young adults are also continuing to focus on how they can invest for their financial future and what’s the best approach for the money they’re able to invest.
“This is the age group that has the biggest opportunity to see their investments grow over the long term which makes the performance of their investments all the more important.
“We’re here to share our expertise and advice to help Canadians explore all the investing options available to them and find opportunities to grow their savings.”