BMO report shows inflation worries rise, but Canadians remain optimistic about financial progress
The BMO Real Financial Progress Index reveals that rising concerns about the cost of living are pushing Canadians to cut back on spending in 2025.
Nearly one-third, or 30 percent, of Canadians plan to reduce their spending in the new year, while 46 percent say the higher cost of living will impact their financial New Year’s resolutions. This figure marks a four percent increase from 2023.
BMO’s report highlights the major financial anxieties Canadians face heading into 2025.
Over half of respondents (54 percent) remain worried about the cost of living, while 50 percent cite inflation and 42 percent point to the risk of a recession.
Leading sources of stress include concerns about their overall financial situation and the fear of unexpected expenses, both cited by 82 percent of respondents.
Housing costs were another key concern for 73 percent, followed by family-related expenses at 67 percent and keeping up with monthly bills at 64 percent.
Despite these concerns, Canadians remain cautiously optimistic. According to the report, 87 percent feel they are making financial progress, and 72 percent are optimistic about their financial future.
Additionally, 37 percent say they feel more financially secure compared to a year ago.
Financial planning remains a goal for many Canadians. Over one in five respondents, or 21 percent, plan to set new financial goals or create a budget for 2025.
Among the 69 percent who have already established financial goals, priorities include saving for retirement at 58 percent, saving for a vacation at 47 percent, and paying down debt at 40 percent.
Still, only 33 percent of respondents currently have a financial plan in place, and 59 percent lack a household budget for the year.
The report also shows how rising costs are influencing Canadians’ plans for major purchases. More than one-third, or 36 percent, intend to make significant purchases in 2025, but rising living costs have forced 24 percent to adjust or reduce their spending plans.
BMO Economics noted that Canadian households may see some relief in borrowing costs next year.
The Bank of Canada has lowered its overnight target rate by 175 basis points since June 2024, marking the most aggressive policy easing among major central banks during this period.
BMO forecasts an additional 75 basis points of rate reductions in the first half of 2025. However, longer-term borrowing costs, which have already declined significantly, are only expected to fall moderately as economic activity recovers.
Anthony Tintinalli, head of Specialized Sales at BMO, underscored the importance of setting financial goals for the new year.
“The new year marks a fresh start for self-reflection and improvement, and we want to empower Canadians to focus on building good habits and making real financial progress,” said Tintinalli.
He encouraged Canadians to use financial advisors and digital tools to monitor their budgets and establish habits that can help achieve financial success.
To support Canadians, BMO offers resources and tools to help with financial planning and literacy. Their SmartProgress platform provides free, online financial education, including interactive content on budgeting, investing, and credit management.
BMO CreditView allows customers to monitor their credit scores and manage credit profiles. BMO Insights offers personalized tools to track spending, detect unusual activity, and monitor cash flow trends.
For savings, the BMO Savings Amplifier Account provides competitive interest rates, no monthly fees, and tools to set and track financial goals.
