Canadians are growing less confident about their financial outlook as rising living costs continue to outpace income growth. According to TransUnion’s Q4 2025 Canada Consumer Pulse Study, more than half of respondents (53%) say their household earnings are not keeping up with inflation.
Looking ahead, nearly one in three Canadians (31%) feel pessimistic about their household finances over the next year. This is down three percentage points from the previous quarter. Financial strain is already evident: one-quarter (25%) report being unable to fully pay at least one bill or loan.
This is occurring despite 20% of respondents saying their income increased over the past three months, while 64% saw no change and 16% experienced a decline.
For those struggling to meet obligations, unsecured debt poses the greatest challenge. Nearly two-thirds (63%) said they could not pay credit card balances or personal loans in full.
Student loans followed closely at 55%, while 45% cited mortgage payments. The findings highlight growing affordability pressures and the difficult trade-offs facing many households.
“Affordability continues to be a concern for many Canadians as economic uncertainty impacts financial decision making,” said Matt Fabian, director of financial services research and consulting at TransUnion Canada.
“While many are taking proactive steps to be financially resilient, there are significant sections of the population who continue to struggle with staying on top of debt payments while navigating rising costs.”
Recession fears drive financial precautions
Concerns about a looming economic downturn are widespread. More than one-quarter of Canadians (27%) believe the country is already in a recession, while an additional 32% expect one within the next year.
Among those anticipating, or already experiencing, a recession, the vast majority (84%) say they are actively preparing. Their most common strategies include:
- Cutting back on spending (61%)
- Increasing savings (38%)
- Paying down existing debt (28%)
- Reviewing credit reports for accuracy (9%)
- Changing jobs (8%)
- Requesting higher credit limits (7%)
- Taking on new credit (5%)
Canadians rethink spending to stay on track
Economic uncertainty is reshaping everyday spending habits. Over the past three months, two-thirds of Canadians (67%) say they have been more vigilant about seeking out sales and discounts.
Additional cost-saving measures include:
- Shopping more often at lower-priced retailers (44%)
- Choosing generic or store-brand products (41%)
- Using coupons more frequently (31%)
- Taking advantage of special credit card promotions (18%)
Only 15% of respondents said they made no changes to their shopping behaviour during this period.
Retirement contributions take a back seat
Many households are scaling back non-essential purchases. Over half of Canadians surveyed (51%) reported reducing discretionary spending—such as dining out, travel, and entertainment—over the past three months.
Looking ahead, nearly one in five (19%) expect to reduce contributions to retirement savings or investments in the coming months. This shift comes as 53% of respondents express concern about not saving enough for retirement over the next three to five years, underscoring the tension between immediate financial needs and long-term planning.
Credit seen as essential, yet out of reach
Access to credit remains a cornerstone of financial planning for most Canadians. A large majority (82%) say credit and lending products are important for achieving their financial goals. However, only 56% believe they currently have adequate access, pointing to a significant gap for underserved consumers.
One in five Canadians plan to seek more credit
Just over one in five Canadians (21%) plan to apply for new credit or refinance existing products within the next year. Younger generations are leading this trend, with nearly half of Gen Z (47%) and 31% of Millennials indicating plans to do so.
Supplementary TransUnion data shows Millennials now hold 38% of Canada’s total outstanding consumer debt—approximately $988 billion. Among those planning to seek credit, nearly half (47%) expect to apply for a new credit card, while 23% plan to request higher limits on existing cards. Others anticipate applying for buy now, pay later loans, auto financing, or mortgage refinancing (each at 20%).
“We’re seeing a continued trend of Canadians turning to credit cards to aid in their cashflow,” Fabian said. “As inflation places additional strain on Canadians’ wallets, many consumers may be looking for increased liquidity to help balance their budgets and may see credit as a useful tool to help them do so.”
Approval concerns hold some Canadians back
Despite recognizing the importance of credit access, nearly one in five Canadians (18%) do not believe they would be approved for new credit if they applied.
Additionally, just over 20% of those who initially intended to apply for new or refinanced credit ultimately decided against it. Among this group, 24% cited fears of rejection due to their credit history, while 26% believed their income or employment status would prevent approval.
Fraud attempts rise with younger Canadians targeted
As fraud tactics evolve—often fueled by emerging technologies like artificial intelligence—nearly half of Canadians (46%) report being targeted by fraud attempts via email, phone calls, texts, or online messages in the past three months.
Among those targeted, 7% said they fell victim to fraud, marking a one-percentage-point increase year over year. Gen Z appears especially vulnerable, with 54% reporting exposure—the highest rate of any generation—likely reflecting their greater online activity.
The most frequently reported fraud methods include:
- Phishing (43%)
- Smishing (41%)
- Vishing (41%)
Despite these risks, 36% of Canadians said they took no action to improve cybersecurity over the past 60 days. Nearly half of this group (48%) admitted they did not know what steps to take, highlighting the ongoing need for consumer education around fraud prevention.
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