While savings are growing for many Canadians, there are clear signs of struggles for millions of households
Will Canada see a recession this year and how prepared are Canadian households to cope with an economic downturn?
A third of respondents to a new survey from TransUnion say that Canada is already in recession but almost three in ten don’t think that there will be a recession in 2023.
That said, building up savings is a priority for many with 34% doing so in readiness for recession. This is more prevalent among younger adults with 50% of Gen Z and 39% of Millennials stockpiling cash.
The Consumer Pulse Survey reveals a shaky picture for many Canadians’ finances with 43% saying that their finances are worse than they had expected and 32% concerned about paying their bills in full including one fifth who plan to borrow from friends or family to make ends meet.
“Concerns around inflation, rising interest rates, housing affordability, and the perceived threat of a potential recession are affecting how Canadians are managing their household finances,” said Matt Fabian, director of financial services research and consulting at TransUnion Canada. “Overall, the study indicates that Canadians are taking a prudent approach in managing their finances in the face of economic uncertainty, including reining in spending, stockpiling savings, and managing their debt levels. Not just in view of today’s financial challenges – but in preparing for what’s ahead.”
Increasing debt again
With much of the record-high savings stockpile that had been built up during the pandemic already utilized, 24% of respondents plan to apply for credit or refinancing in the next 12 months with credit cards, personal loans, and mortgages the top three choices.
Other shifts in how Canadians are managing debt and savings over the last three months include:
- Saved more in emergency fund (19%)
- Pay down debt faster (17%)
- Cut back on savings for retirement (15%); versus saved more (12%)
- Increased usage of available credit (13%)
- Used retirement savings (8%)
But this could be creating problems for many further down the road as 31% are pessimistic about their finances over the next 12 months and 55% don’t feel their income is keeping pace with the rate of inflation.
Four in ten poll participants are optimistic about their finances in the next 12 months, with Boomers most likely to say so.
Overall, inflation (47%), rising house prices (14%), and possible recession (11%) are the top concerns cited as affecting household finances over the next six months.
