Canadians are heading into the new year bracing for mounting financial challenges, with a strong majority (71%) expecting the cost of living to worsen. According to the latest MNP Consumer Debt Index conducted quarterly by Ipsos, this pessimism extends well beyond prices, reflecting a broader sense that economic conditions will deteriorate in 2026.
“There is a widespread sense that household finances will come under increasing pressure, fueling heightened anxiety about economic security in the year ahead,” explains Grant Bazian, president of MNP LTD, the country’s largest insolvency firm. “Canadians expect most aspects of daily life to worsen rather than improve in 2026.”
A majority believe the economy overall will worsen (59%) this year, and as many expect housing affordability to deteriorate (59%). Canadians also anticipate rising pressure from interest rates and inflation (54%), unemployment and the job market (52%), and Canada’s relationship with the United States (51%). Canadians believe everyday financial pressures will intensify, with the majority anticipating higher taxes (53%), and about half expecting transportation (50%) and healthcare costs (48%) to worsen. The majority also have concerns about rising poverty and inequality (62%) as well as worsening government deficit and debt (66%), said MNP.
While Canadians express pessimism about what may come this year, there is some cause for optimism. The MNP Consumer Debt Index edged up one point from last quarter to 87 points, marking the first time since its inception that the Index has improved in December and bucking the typical seasonal trend of deteriorating debt sentiment, it said.
Two in five Canadians (41%) say they are within $200 of not being able to pay their bills each month, down seven points from last quarter and the lowest level measured in the post-pandemic period. At the same time, the average amount Canadians have left after monthly expenses has risen by $163 since last quarter, now sitting at $907. While these gains point to modest financial relief, fewer than half of Canadians (47%) report having six months of emergency savings, leaving many households vulnerable to disruption, added the MNP report.
“Despite pessimism about 2026, there are signs of cautious optimism, breaking from the Index’s usual seasonal decline and suggesting that some households are entering the new year with slightly more financial breathing room,” said Bazian. “Whether Canadians respond to financial stress by taking action or avoiding their debt often comes down to how much financial flexibility they feel they have. For some, their breathing room has improved, enabling them to make adjustments and seek solutions. For others, ongoing economic uncertainty continues to drive debt avoidance. Sustained financial pressure is prompting both decisive action and withdrawal among Canadians.”
Financial Fight or Flight: How Canadians Are Responding to Financial Stress
As financial pressures intensify, Canadians are responding in markedly different ways. Nearly three in five (59%) are adopting a “fight” mentality, taking proactive steps such as adjusting their budgets (43%), attempting to consolidate debt (12%), or seeking advice from a financial professional (11%) as they try to regain control amid ongoing strain. At the same time, nearly one-third of Canadians (32%) are taking a “flight” response, including avoiding thinking about their financial responsibilities (12%), steering clear of financial discussions with family or professionals (15%), or relying on credit to cover essential expenses (17%). Meanwhile, fifteen percent (15%) say they feel financially frozen, unsure where to even begin when facing financial stress, explained MNP.
“Even when there are small signs of financial improvement, the concern with many Canadians being in financial flight mode is that it can create a false sense of short-term relief,” said Bazian. “Avoiding bills and conversations about finances or relying more heavily on credit can make financial stress feel manageable in the moment, but those behaviours often allow problems to grow quietly in the background. As Canadians head into an uncertain year, that can make it harder to regain control later on.”
Younger Canadians aged 18–34 are significantly more likely to lean toward a flight response (51%) when under financial stress, as are lower-income earners, with one-third of Canadians earning under $40,000 reporting similar behaviours (34%). This younger age group is also the most likely to feel financially paralyzed (23%) compared to other age groups, and is more likely to avoid discussing financial matters with family or professionals (22%), according to the report.
Interest Rate Sensitivity Leaves Canadians Financially Exposed
While the Bank of Canada held its last policy interest rate at 2.25%, rates remain a critical source of stress for Canadians. Nearly two in three (64%, +1 pt) say they urgently need interest rates to come down. Even then, relief may be limited: nearly half (48%, +4 pts) remain concerned about their ability to repay debt, and more than two in five (44%, +2 pts) fear that a future increase in rates could push them toward bankruptcy. For heavily indebted households, these concerns underscore just how thin the margin for financial stability remains as they look ahead to the coming year, said MNP.
“Even where Canadians see some improvement in their own debt situation, confidence about the year ahead remains fragile, particularly among those carrying high levels of debt,” noted Bazian. “For these households, ongoing affordability challenges and borrowing costs leave little room for error as they head into 2026.”
Debt Stress Runs High, Yet Professional Help Remains Underused
“Despite widespread concern about costs, debt, and the year ahead, relatively few Canadians are turning to professional support when facing financial stress. Just over one in 10 Canadians (11%) say they have sought advice from a financial professional as part of their efforts to fight back against financial strain. Fifteen percent (15%) avoid discussing financial matters with family or professionals altogether, while one in 10 (12%) avoid any kind of thinking about their financial responsibilities,” said the report.
“These findings echo a recent joint consumer alert from the Office of the Superintendent of Bankruptcy (OSB) and the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), which highlighted how stress and stigma can prevent Canadians from asking for help and delay access to trusted, regulated guidance from Licensed Insolvency Trustees — professionals qualified to help individuals understand all available options and provide judgment-free support.”
“Too many Canadians are trying to navigate financial challenges in isolation. There are government-regulated professionals available to help indebted Canadians understand debt-relief options, make informed decisions, and prevent financial stress from escalating,” said Bazian.
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