17th December 2024: A special report from BMO’s Real Financial Progress Index reveals that concerns over the rising cost of living are impacting Canadians’ financial plans for 2025. Nearly 30% of Canadians have indicated that they plan to reduce their spending in the coming year, a clear sign of the strain that inflation and economic uncertainty are placing on household budgets.
According to the report, almost half (46%) of Canadians say that the increasing cost of living will influence their financial New Year’s resolutions—up 4% from last year. The BMO report highlights the ongoing financial challenges facing Canadians as they head into 2025.
Rising Financial Concerns
The 2024 Financial Wrap section of the report emphasizes the growing financial anxiety among Canadians. A majority of respondents are worried about the cost of living (54%), inflation (50%), and the possibility of an economic recession (42%). Common sources of stress include concerns about overall financial stability (82%), unexpected expenses (82%), housing costs (73%), family expenses (67%), and keeping up with monthly bills (64%).
Despite these worries, the majority of Canadians remain optimistic about their financial future. An overwhelming 87% believe they are making real progress toward financial stability, and 72% are hopeful about their financial outlook for 2025. Additionally, 37% of respondents feel more financially secure than they did a year ago.
Financial Goals for the New Year
Looking ahead to the New Year, many Canadians are setting new financial goals. Over one in five (21%) plan to create a budget or set financial objectives for 2025. Among those who have already established financial goals, the top priorities include saving for retirement (58%), planning for a vacation (47%), and paying down debt (40%).
However, the report also notes that a significant number of Canadians still lack a structured financial plan. Only 33% of respondents have a formal financial plan, and 59% do not have a household budget for the year. In addition, 36% of Canadians are planning major purchases in 2025, with 24% indicating they will adjust their purchases due to rising costs.
Reviewing Financial Progress
According to the report, Canadians remain diligent about staying on track with their financial plans. On average, 92% of respondents review their financial plan at least once a year, suggesting a proactive approach to financial management.
Positive Economic Outlook for 2025
BMO Economics suggests that Canadian households can expect a more favorable borrowing environment in 2025, as the Bank of Canada is expected to continue easing its monetary policy. Following a significant 175 basis point rate cut since June 2024, an additional 75 basis point reduction is anticipated in the first half of 2025. While borrowing costs are expected to decrease, they are likely to remain moderate in the long term as economic activity picks up.
Encouraging Financial Habits
Anthony (Tony) Tintinalli, Head of Specialized Sales at BMO, emphasized the importance of setting financial goals for the upcoming year. “The new year marks a fresh start for self-reflection and improvement,” Tintinalli said. “We want to empower Canadians to focus on building good financial habits and making real progress by encouraging them to start defining their financial goals now.”
He also encouraged Canadians to work with financial advisors and take advantage of online banking tools to track their spending, establish a budget, and develop the habits needed to secure long-term financial success.
As 2025 approaches, Canadians are poised to navigate the challenges of rising costs while remaining committed to financial progress and stability.
