Canada, Brace for a "Decade of Austerity"

Insight and advices

Canada, Brace for a "Decade of Austerity"

Jun 25, 2025

Inflation Eroding Savings, Debt Pressures Mount, Retirement Becomes a Luxury — What You Can Do

In the first half of 2025, Canada has shifted from a narrative of “growth” to one of tightening finances.

A recent column by Globe and Mail contributor and Canadian banking historian John Turley-Ewart warns that Canada is entering “a decade of reduced living standards and fiscal frugality.”

🚨 Data Reveals a Strained Economic Reality

According to a HOOPP report, many Canadians feel alarmed when calculating their retirement needs:

52% are very worried about their finances
50% feel depressed
47% report emotional exhaustion
43% say they are feeling depressed
Not one metric shows financial improvement in 2025 compared to 2024.

Meanwhile, household debt has reached nearly 185% of disposable income, the highest among G7 countries (G7 average: 125%). Total household debt exceeds $3 trillion CAD, with nearly three-quarters tied to mortgages.

🏠 Housing Costs and Living Expenses Squeezing Budgets

The Office of the Superintendent of Financial Institutions (OSFI) reports:

By end-2026, approximately 3.8 million mortgages are up for renewal
Of those, around 2.4 million have not yet experienced increased monthly payments due to rising rates

In other words, many Canadians will soon face substantially increased mortgage costs.

At the same time, daily living expenses continue rising—according to the Bank of Canada’s inflation calculator, something that cost $100 CAD in 2020 now costs $120 CAD.

Combined, rising housing costs, food inflation, and general expenses have left minimal room for household saving.

📉 Savings & Net Worth Growth Slows to a Crawl

Statistics Canada’s 2025 Q1 National Balance Sheet and Financial Flow Accounts report shows:

Household savings rate declined for the second straight quarter
Spending rose +1.0%, while disposable income increased only +0.8%
Household net worth grew only 0.8%, down from 1.0% the previous quarter

What’s more, most of that growth is concentrated among the top 20% wealthiest households, who hold 68.1% of financial assets and 51.2% of real estate. For middle-income families, asset growth has virtually stalled.

🔒 Retirement Has Become a Distant Dream

Turley-Ewart concludes:

“For many Canadians preparing for retirement, most of their disposable income is going toward debt repayment. Meanwhile, ‘retirement’ is increasingly becoming an elusive wish rather than a real possibility.”

💡 Ai Financial Insight: How to Navigate the “Decade of Austerity”

Though we can’t change macroeconomic pressures, we can adapt our personal financial strategy:

Use investment loans to efficiently leverage capital, rather than relying solely on savings
Optimize your account structure—TFSA / RRSP / FHSA—to maximize tax-free growth
Focus on long-term, capital-protected funds to navigate market fluctuations
Utilize tools like AiFundTech to manage cash flow and streamline investments

Want us to assess your family’s preparedness for the next ten-year squeeze?

📩 Contact an Ai Financial advisor today—we’ll help you build a customized 5-year wealth growth plan