Canadians are making big changes to their holiday spending as they continue to feel the pinch of inflation on their finances, according to the latest Bank of Montreal Real Financial Index.
Nearly eight in 10 people are making a variety of spending changes to offset the impact of higher prices, including purchasing less expensive gifts (37 per cent), reducing big purchases (33 per cent), spreading purchases over several months (24 per cent) and trimming their list of gift recipients (28 per cent).
“The impact of inflation on Canadians’ finances is having a direct impact on how people shop this holiday season,” Gayle Ramsay, head of Everyday Banking at BMO, said in a press release.
More than four in 10 Canadians said they are either planning to modify or push back major purchases, including the 63 per cent who indicated they no longer plan to make large purchases such as buying a car or home this year.
“In addition to setting and following a holiday budget this year, it is crucial for Canadians to create a financial plan for 2023,” Ramsay said. “As we head into the new year, a key to alleviating financial anxiety will be learning how to protect financial progress you have made already, and how to continue making progress through a challenging economy.”
Younger Canadians (aged 18 to 34) are also changing the way they pay for this year’s holiday gifts, with generation Z and millennials being more likely to rely on their savings, debit cards and buy now, pay later programs.
“Given the highest inflation in four decades and the fastest interest rate increases in three decades, it’s not surprising that Canadian families, especially younger ones, are feeling substantial strain on their finances and well-being,” Sal Guatieri, senior economist at BMO, said in the release.
Along with changing the way they approach gift giving this holiday season, people are also making changes to their own wish lists.
A separate survey by personal finance comparison site Finder found that almost half of Canadians are listing cash at the top of their wish lists this year to help them pay for essential bills (20 per cent), build up savings (20 per cent) or build up an emergency fund (nine per cent).
“While many of us looked for ways to stretch a dollar, others found it impossible to trim the budget,” Romana King, senior finance editor at Finder, said in a press release. “It’s no surprise, then, that cash tops the list for most requested gift this holiday season.”
Overall, BMO said Canadians’ financial confidence has dropped, with only 69 per cent of adults feeling confident compared to 75 per cent last year.
More than eight in 10 Canadians indicated their financial situation is increasing their anxiety, with the most significant sources being housing costs (71 per cent), fear of unknown expenses (84 per cent) and family-related expenses (68 per cent).
However, there is a silver lining: “The relatively good news is that policy rates are expected to stabilize in 2023 as inflation slows, setting the stage for potentially lower borrowing costs in 2024,” Guatieri said.