Right now, Canada is facing a high inflation rate. This means that the cost of things we buy, like food and services, is going up quickly—much faster than how much people earn. A survey showed that 45% of Canadian adults are very worried about inflation. Another 45% are somewhat concerned. These worries are real because inflation can make life harder, especially for people with lower incomes. However, there are ways to deal with high inflation, like how you budget your money, where you shop, and how you save.
What is Canada’s Inflation Rate?
Inflation is measured by economists to see how fast the prices of goods and services are rising. They use something called the Consumer Price Index (CPI). Inflation changes with production costs and how much people want certain products and services.
In July, annual inflation increased by 2.5%, according to Statistics Canada. At the same time, average hourly wages grew by 5.2% over the past year. This means people are making more money, but prices are also going up. July’s inflation rate is lower than the 2.7% rate from June 2024, but it has not yet stabilized near the Bank of Canada’s target of 2%. In fact, July marks the 41st month in a row that inflation has been higher than the Bank of Canada’s target.
How to Manage High Inflation
High inflation can stress many Canadians financially. While earning more money is one way to handle rising prices, it can be hard for many people. Here are some other tips to manage rising costs if you can’t make extra money right now:
Reassess Your Spending Habits
If inflation is making it tough to stick to your budget, take some time to look at how you spend your money. A survey found that 83% of Canadians say they have changed their spending because of inflation. About 33% are spending less and being careful.
Start by figuring out if there are things you can live without for now so that you can cover essential needs like housing, groceries, transportation, and utilities. For many people, this might mean stopping non-essential expenses, like eating out, subscription services, or gym memberships.
Be Careful with New Debt
Although the Bank of Canada kept interest rates low during the pandemic to help with inflation, they raised rates in 2022. When rates go up, variable-rate debts can suddenly cost more.
To protect yourself from sudden increases, consider refinancing your variable-rate mortgage into a fixed-rate loan. You could also combine high-interest credit card debt into a personal loan with steady payments.
Be cautious about taking on new debt, even when rates are low or fixed. New debt adds another monthly payment to your budget, which can limit your financial choices.
Become a Sale Shopper
Now is a great time to focus on finding bargains. This doesn’t mean you have to become an extreme coupon collector, but you should pay more attention to sales and use them to guide where and when you shop.
According to a survey, 47% of Canadians are paying more attention to sales because of rising inflation. About 25% are switching to cheaper brands, and 20% are buying more items in bulk.
Using price matching policies is another smart way to save money. This means you can get an item you need at a lower price, or you can get money back if something you bought goes on sale later.
Maximize Loyalty and Rewards Programs
Many Canadians sign up for loyalty programs at grocery stores, like PC Optimum, which is run by Loblaw Companies and Shoppers Drug Mart. Before you shop, take a few minutes to check your program’s app or website to see what deals are available. Use these deals to help plan your shopping list and earn extra points for future purchases.
Don’t forget about the points or rewards you have collected from your credit cards. You can often exchange them for cash back, travel discounts, and more. Some credit card companies even have special promotions where you can use points for merchandise or gift cards that might help you save.
Be Smart with Savings
High inflation can also mean you earn less interest on your savings. If you’re worried about the ups and downs of investments or don’t like the variable rates of high-interest savings accounts, think about using a Guaranteed Investment Certificate (GIC).
With a GIC, you won’t be able to access your money for a certain time, which could be a few months to several years, but the interest rate is fixed. While your high-interest savings account (HISA) or investment earnings might drop during high inflation, a GIC will earn interest at a steady rate.
In conclusion, high inflation can be stressful for many Canadians, but there are ways to manage your money better. By reassessing your spending, being careful with new debt, becoming a sale shopper, maximizing rewards programs, and being smart with savings, you can help protect yourself from the effects of rising prices. Staying informed and making good choices can make a big difference in your financial well-being during tough times.
