Financial Confidence Dwindles Among Canadians Despite Majority Feeling Household Finances are as Planned or Better so far in 2022

Q2 2022 TransUnion Canada Consumer Pulse study key findings:

• 59% reported their finances are the same or better than planned; however, only 40% felt optimistic about their financial outlook.
• 89% expected household income to stay the same or increase over the next 12 months.
• 48% reported cutting back on discretionary spending over the last three months.
• 17% said their income decreased.
• 20% said they saved more in an emergency fund and 15% paid down debt faster compared to 12% increased discretionary spending in last three months.
   

TransUnion’s most recent Consumer Pulse study* shows that while the majority (59%) of Canadians feel positive about their current personal finances, only 40% are feeling optimistic about their household finances over the next 12 months. Record-high inflation combined with climbing interest rates is fueling a sense of dwindling financial confidence, which could lead to a continued drop in consumer confidence if affordability becomes a growing issue.

Almost half of Canadian households (48%) said they've reduced discretionary spending in the past three months, and 49% of Canadians appeared to change their savings and debt behaviours. This includes those who reported they saved more money in an emergency fund (20%), cut back on retirement savings (14%) or paid down debt faster (15%) in the past three months. Looking ahead, many consumers are anticipating increased spending on expenses like bills, medical costs and digital spending. In addition, Canadians expressed increased concern around their ability to pay their bills, with 28% indicating they won’t be able to pay their current bills or loans in full.

“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 behaviours as Canadians brace for what’s ahead.”  

Canadians feel positive about their current financial situation and future income – but are increasingly concerned about their future financial outlook: The latest Consumer Pulse survey showed 59% of Canadians felt like their finances were the same or better than planned so far in 2022. Overall, 19% reported that their household income increased since the last quarter, versus 64% who said it stayed the same, and 17% who said it decreased. When it comes to longer-term perspective, the majority of Canadians’ (60%) were not optimistic about their household finances over the next 12 months as concerns about inflation and affordability grow. Despite this, more than half (58%) of Canadians expected their household income to stay the same and 31% expected it to increase over the next year, compared to 11% who anticipated a decrease in their household income.

Canadians tighten their spending purse strings: As concern continued over inflationary and interest rate pressures, consumers took a conservative approach to spending. Many Canadians reporting reigning in household spending, including:

• Almost half (48%) of Canadians reported cutting back on discretionary spending such as dining out, travel and entertainment, over the last three months. This compares to 12% of consumers who reported increased discretionary spend during that period.
• 19% cancelled subscriptions/memberships, versus 7% who added subscription or memberships.
• 14% cancelled or reduced digital services, versus 7% who added or expanded digital services. 

Canadians take cautious approach to managing their debt and savings: Many Canadians reported focusing on increasing their savings and on paying down debt, while, conversely, a smaller percentage reported increasing available credit and/or using their retirement savings to help manage cash flow. Here are the behaviours Canadians reported in the three months prior to the survey:

• 20% saved more in emergency funds.
• 15% paid down debt faster.
• 14% cut back on saving for retirement.
• 13% increased usage of available credit.
• 12% saved more for retirement.
• 8% used retirement savings.

With dwindling financial outlook around their household finances, paying bills is a concern among many Canadians: While the majority felt confident they can pay their bills, 28% reported they will be unable to pay their current bills and loans in full (up from 25% in Q1 of 2022). Younger Canadians appear to be more impacted – 41% of Gen Z and 38% of Millennials indicated they will not be able to pay their current bills in full. This is likely due to the speed of economic recovery between generations. During the pandemic, younger workers experienced higher rates of unemployment or reduced work hours, which may have adversely affected their finances, slowing down their financial recovery. Of all Canadians who reported they won’t be able to pay their current bills in full:

• 35% said they will pay a partial amount based on what they can afford.
• 26% reported they will borrow money from friends or family to pay their bills or loans.
• 12% indicated they will use money from savings.
• 8% said they will use unemployment benefits.

Canadians brace for shifts in household spending: As Canadians look ahead to the next three months, many are anticipating increases in their bills and loans and other household spending, including:

• Bills and loans (31%).
• Digital spending (18%).
• Discretionary spending (18%).
• Retail shopping, such as clothing or electronics (18%).
• Medical expenses (17%).
• Retirement funds/ investing (15%).
• Large purchase, such as appliances or cars (14%).

TransUnion’s COVID-19 support center provides helpful information for consumers who are concerned about their ability to pay bills and loans. The complete Consumer Pulse study can be viewed here.

*The most recent Consumer Pulse study includes a survey of 1,007 Canadian consumers conducted between May 20 and June 2, 2022. 

About TransUnion (NYSE: TRU)

TransUnion is a global information and insights company that makes trust possible in the modern economy. We do this by providing a comprehensive picture of each person so they can be reliably and safely represented in the marketplace. As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good.® TransUnion provides solutions that help create economic opportunity, great experiences and personal empowerment for hundreds of millions of people in more than 30 countries. Our customers in Canada comprise some of the nation’s largest banks and card issuers, and TransUnion is a major credit reporting, fraud, and analytics solutions provider across the finance, retail, telecommunications, utilities, government and insurance sectors.

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