On September 23, the Canadian dollar was worth as little as 73.69 U.S. cents. This is a significant drop from a high of 80 cents US earlier this year.
I’ll tell you how the falling value of the loonie could affect your finances and give you some tips on how to make your money go further.
How The Loonie’s Fall Will Affect Your Finances
In a recent report, the World Bank said that Canada and the rest of the world could be heading for a global recession in 2023.
This, along with the falling value of the loonie, could hurt Canadians’ finances in their daily lives.
The price of food went up.
If you’ve been to the grocery store lately, you’ve probably noticed that food and other necessities cost more because of inflation. As the value of the loonie goes down, so does its buying power. This could mean that you have to spend more money on groceries. Make sure you have enough money in your budget to cover this.
More expensive goods from other countries are
Even though Canada is a big place for making things, many of the things we use every day come from other countries. From the Canadian Encyclopedia, here are some of the most popular things that come from Canada:
- Parts for cars that were made in Europe or Asia
- Electronics like phones, laptops, and TVs are made in other countries.
- Fuel and oil that comes from other countries
- Plastics
When the Canadian dollar’s value goes down, we can’t buy as much with it. This means that the prices of everyday items and necessities may go up, which can have a very real effect on our account balance each month.
Things like home goods and clothes that are bought from other countries could also become more expensive.
Small businesses have fewer customers and shoppers.
If you own a small store or business that provides a service, you might see fewer customers and clients.
Also, as a small business, you may find that your daily operating costs are going up because office supplies and other important business items are getting more expensive.
How to Stop the Loonie From Falling
Now that you know how the falling loonie could affect your finances, here are some practical tips that can help you stay on top of your money.
1. Pay off high-interest debts as soon as possible.
If you have a loan or credit card balance with a variable interest rate, you should focus on paying off your debt as quickly as possible. If your lender or credit card company decides to raise your interest rate, you might have to pay more money.
The less interest you have to pay in the future, the more money you should put toward your principal balance now.
2. Purchase the most important foods in bulk.
A good way to save money on groceries is to buy them in bulk. I’d say, though, that it’s more important than ever today. Use the space in your freezer to store food that will spoil and stock up on things that won’t go bad, like canned goods.
You’ll save a lot more money by shopping at wholesale grocery stores than it will cost you to become a member each year.
3. Don’t spend a lot of money right now.
As the cost of necessities goes up, I think it’s best to put off big purchases for now. You might want to buy that new car, take that trip to the Caribbean, or fix up your kitchen. But buying these things could make it harder for you to pay for the things that are more important.
4. Don’t buy things that aren’t necessary.
Aside from avoiding big expenses, Canadians can save money in other ways as their costs rise, such as:
I rarely eat out at restaurants.
- Find free ways to have fun, like going hiking on local trails, getting a library card so you can borrow free books and movies, or listening to podcasts.
- Getting rid of memberships that cost a lot
- Getting rid of services like lawn care or snow removal
- Instead of buying new clothes, shop at thrift stores instead.
Last Tips
Most Canadians’ wallets are going to be hurt by the falling value of the loonie. As long as you are smart with your money, save more than you spend, and focus on the essentials, you should be able to stay on top of your personal finances.
FAQS
What happens when the value of the Canadian dollar drops?
Many other advanced economies depend less on exports of natural resources than we do. If the price of raw materials goes down, our currency usually goes down, too. This makes other things Canada sells abroad, like cars, airplane parts, and medicines, cheaper for people in other countries to buy.
What is a consequence of the Canadian dollar depreciating?
When the value of the CAD goes down, import prices go up. So, the cost of making the goods goes up, which causes the prices of the goods to go up. Exports are cheap because the value of the dollar has gone down, so investors make little to no money.
What does it mean when the Canadian dollar drops?
One foreign exchange strategist says that the Canadian dollar’s drop against the U.S. dollar is partly due to how closely it is tied to resource and commodity prices. This makes it sensitive to changes in global growth and equity market trends.
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