Canadian investor confidence low as knock-on pressure of inflation hits savings, investments

Businesswoman viewing graphs on a computer

Canadians’ confidence in achieving their financial goals has been impacted by inflation and increases in the cost of living.

The inaugural survey by the Canadian Investment Regulatory Organization (CIRO) and Innovative Research Group, found that only 21per cent of Canadians reported feeling very confident about meeting their financial objectives. The survey, based on responses from more than 3,400 Canadian adults, was conducted in January 2024 and provides a current snapshot of investor sentiment.

Among respondents who reported low confidence in meeting their financial goals, 66 per cent cited inflation and the rising cost of living as factors holding them back from investing.

Among Canadians who continued to invest in the twelve-month period immediately prior to being surveyed, 45 per cent reported investing the same amount as in the previous year. However, 29 per cent reported investing less or they have stopped investing altogether. Among respondents who have stopped investing or reduced the amount they invest, 60 per cent reported that inflation and cost of living were the main reason for not having enough money to do so.

Old and Young: Inflation as a Generational Challenge

The survey takes a deeper look at how Canadians feel about their savings and investment prospects.

Unsurprisingly, not having enough money to invest is the most reported (61per cent) reason for being held back from investing overall. However, the survey also shows that 40 per cent of Canadians aged 18 to 34 have had to borrow money to cover daily expenses in the last year, while 11per cent of seniors reported doing so. Given the high-interest rate environment, prospects for these Canadian investors are stark.

Futures At Risk: Financially Vulnerable Persons

In addition to age, the survey also considered gender, financial literacy, total investable assets and financial vulnerability, among other respondent characteristics and demographic attributes.

Among those were identified as financially vulnerable, 75 per cent of the most vulnerable reported not having enough money to invest. The survey shows that with increases in the number of challenging life events (measured by health conditions, mental health conditions, disabilities, accidents, injuries, divorce, caregiver duties, and deaths) paying down debt and building an emergency fund take precedent over saving for retirement.

The study also suggests a possible correlation between the frequency of life challenges and the frequency and duration of financial worry. Of respondents who reported multiple challenging life events, 61per cent worry all or most of the time about their income.

Significantly, with increases in health conditions and major life events, confidence in one’s ability to meet financial goals decreases. Seventy-three percent of those with no major life events report feeling confident about meeting life challenges, while only 56 per cent percent of those who experience multiple challenging life events reported feeling confident about the same—a 17-point difference. When accounting for the fact that one’s financial goals shift towards debt repayment and emergency fund savings with increased occurrences of major life challenges (a secondary finding of the survey), this disparity has consequences for Canadians’ long-term financial outlook.

Finfluencers Fill an Information Vacuum

While Canadians still report going to financial advisors (42 per cent) and banks and financial institutions (39 per cent) for information and advice when making decisions about money, 38 per cent report going to friends and family for guidance.

But technology is having an impact as Canadians are also turning to social media and financial influencers (finfluencers) for information. While 17 per cent of investors overall get information and advice from news (print, online and broadcast), 22 per cent of respondents use social media, forums and finfluencers for financial information. Of these, 44 per cent believe the information they receive is as valuable as what they would get from a regulated financial advisor and 12 per cent believe it is more valuable.

CIRO’s Office of the Investor

The mandate of CIRO’s Office of the Investor includes investor research on Canadian investor attitudes, knowledge, beliefs and behaviour that can support policy development.

“Our goal is to enhance investor confidence and ensure [investors] have access to reliable, regulated financial advice,” said Karen McGuinness, Senior Vice-President, Office of the Investor.

The results of this survey will help inform the work of CIRO and the Office of the Investor by establishing a baseline for future surveys and research. They will also guide policy and educational projects to support Canadian investors of all kinds.