Posthaste: Inflation adds new uncertainty to Canadians' financial future

© Provided by Financial Post A woman shops for groceries at Toronto’s Yao Hua Supermarket on Gerrard Street East on Jan. 19, 2022.

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The worst inflation scare in more than 30 years is adding a new uncertainty to Canadians’ financial future. 

Statistics Canada’s consumer price index rose at an annual pace of 4.8 per cent in December, the fastest since 1991.  

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Households have noticed. For the first time in more than a decade, inflation is one of the top three concerns Canadians have about their retirement, according to RBC’s Financial Independence in Retirement Poll. 

Some 29 per cent of respondents said the rising cost of fixed expenses (rent, mortgage, food, etc.) is hindering their ability to save more money.

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Worry seems to be more acute among younger people: 40 per cent for those aged 25 to 34 said inflation was beginning to pinch. A majority (85 per cent) of the younger age group is also the most worried about balancing saving for today with saving for the future.

According to Statistics Canada, costs have gone up in almost everything. Food prices rose 5.2 per cent from December 2020, while home and mortgage insurance costs climbed 9.3 per cent. Supply-chain disruptions also led to higher prices in durable goods such as passenger vehicles and household appliances.

Still, the RBC poll found that almost half (48 per cent) of Canadians have a financial plan, and most of them (86 per cent) are feeling positive about their futures because of it.

“The unexpected has changed lives over the past two years, but if you have a plan, it’s easier to adapt to those changes,” said Stuart Gray, ​​ director of RBC’s Financial Planning Centre of Expertise. “A plan helps you keep on top of your finances, so you know what adjustments you can make for changing circumstances while saving for today and investing for the future.” 

More than half  (53 per cent) of respondents now have a registered retirement savings plan (RRSP), an increase from 46 per cent last year, which was the lowest that RBC had ever recorded. Within those RRSPs, the number of Canadians holding mutual funds, stocks and ETFs is increasing as well.

Canadians have also been investing more during the COVID-19 pandemic, with the younger generation expressing the most interest in building their portfolios. Nearly half (48 per cent) of younger investors indicated they would be willing to pay fees for higher returns on their investments.

“When assessing value, investment performance after fees is what really matters. It’s encouraging to see that younger Canadians understand how crucial this is in achieving your retirement savings goals and building a strong financial future,” said Gray. 

The Bank of Canada expects inflation to remain close to five per cent in the first half of 2022 before moving lower. On Wednesday, the central bank went against market expectations and held interest rates at 0.25 per cent while hinting of a hike to come.

“There is some uncertainty about how quickly inflation will come down because we’ve never experienced a pandemic like this before. But Canadians can be assured that we will use our monetary policy tools to control inflation,” said governor Tiff Macklem at a press conference.

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ON THE ROAD TO OTTAWA Well wishers line an overpass on Highway 400 near Toronto Thursday to cheer on truckers headed to Ottawa in protest of the federal government’s COVID-19 vaccine mandate for cross-border drivers. The federal government ended truckers’ exemption to the vaccine mandate two weeks ago meaning Canadian truck drivers need to be fully vaccinated if they want to avoid a two-week quarantine when they cross into Canada from the U.S. Hundreds of supporters of the truckers’ protest lined the highways as the convoy makes it way to the so-called “freedom rally” on Parliament Hill planned for Saturday. Photo by Jack Boland/Toronto Sun/Postmedia Network

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• Today’s Data: U.S. personal income and spending
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Canada’s tight labour market loosened a little in November, but job vacancies still remain unusually high.

The number of unfilled positions declined 9.3 per cent from October to 874,000, according to Statistics Canada. But that is still 72 per cent higher than the fourth quarter of 2019.

‘We’ve definitely shifted to a job-seeker’s market,’ said Brendon Bernard, an economist at Indeed.

Read the full story by Bianca Bharti to get an idea of what this means for Canada’s economy.

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Do-it-yourself investing is booming as investors consider cutting ties with their financial advisers.

You don’t have to understand every dynamic shaping market trends to succeed, but you do need to be prepared.

Our content partner Moneywise Canada points out what you should know before setting off on your own. 

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Today’s Posthaste was written by Noella Ovid.

Have a story idea, pitch, embargoed report, or a suggestion for this newsletter? Email us at  posthaste@postmedia.com , or hit reply to send us a note.

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