By Danielle Kubes on October 15, 2024 Estimated reading time: 8 minutes
25 personal finance highlights from the last 25 years
By Danielle Kubes on October 15, 2024 Estimated reading time: 8 minutes
From legislative changes to economic trends and consumer behaviours, here are 25 financial highlights that defined the last two and a half decades.
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Over the last 25 years, personal finance in Canada has transformed enormously. Major economic shifts, new technology and evolving consumer behaviour have led to new policies and events. Here are some of the most interesting personal finance developments in the last two and a half decades:
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1. 1999: No longer did Canadians have to wait until they retired to access their registered retirement savings plans (RRSPs). The government introduced the Home Buyers’ Plan, whereby first-time home buyers can make a tax-free withdrawal from their retirement savings to fund a down payment on a home. Canadians have 15 years to repay themselves the amount withdrawn before being taxed on it. (New in 2024: the government has increased the amount you can borrow, from $35,000 to $60,000.)
2. 2000: The stock market was flying high and everyone was overly excited about the possibility of internet companies. Between 1995 and 2000, the Nasdaq composite stock market index rose by 800%. Unfortunately, the dot-com bubble burst by 2002. All the gains vanished and dozens of online companies shut down. The stock market remained stagnant for the next decade.
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3. 2002: The first Euro coins and banknotes were issued. The introduction of this currency—now used in 20 European Union countries—primarily affected the European economy, but it also influenced Canadian financial markets and trade relations. Some voices called for America, Mexico and Canada to follow suit with a pan-American currency. The European Union is now Canada’s third-largest trading partner, after the United States and China.
4. 2004: Canada’s housing market began its stratospheric ascent, growing 10% year-over-year to an average national selling price of around $250,000. Today that figure is over $600,000. The last 20 years have led to a significant increase in household wealth for some Canadians, but also mounting anxiety over housing affordability.
5. 2006: The government introduced a new direct payment to families, then called the Universal Child Care Benefit. At first, every family with a child under the age of six received a taxable $100 monthly cheque. The program has since evolved and expanded into the Canada Child Benefit. This pronatalist policy has helped reduce Canada’s child poverty rate.
6. 2007–2008: Canada weathered the global financial crisis better than many other advanced economies, through a strong and regulated banking system. While Canadians still saw a downturn in the job and real estate markets, the effect was muted compared to other nations and the recovery was swift.
7. 2008: The federal government introduced the registered disability savings plan (RDSP), with the goal of helping Canadians with disabilities improve their long-term financial security. The government provides matching grants and bonds on RDSP contributions. To access the account, however, Canadians must first qualify for the disability tax credit (DTC), a lengthy process contested by some disability activists.
8. 2009: The government launched the tax-free savings account (TFSA), a registered account allowing for tax-free growth and withdrawals. TFSA annual contribution room carries over if unused, making it more flexible than other registered accounts. Today, over half of Canadians have a TFSA.
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9. 2009: Satoshi Nakamoto, an anonymous computer programmer, invented bitcoin, the world’s first cryptocurrency. For years, it remained under the radar, until it exploded in popularity during the COVID-19 pandemic, rising in value over 600% by 2021. But then a wave of closures among cryptocurrency exchanges due to embezzlement and other crimes scared investors off. Still, bitcoin is now firmly in the mainstream. (See our best crypto platforms ranking to find companies approved in Canada.)
10. 2011: Several European countries, most notably Greece, were plunged into a debt crisis and were forced to take rescue packages from other, wealthier European countries and the International Monetary Fund, an international financial institution funded by 190 member countries. Although Canada was fairly insulated, our banking sector watched vigilantly for any spillover effect.
11. 2012: Increasing worries about high Canadian mortgage debt levels and the effect they could have on consumer spending pushed the Canadian government to introduce stricter mortgage rules. The maximum amortization period for insured mortgages was reduced from 30 to 25 years, and a mortgage stress test was introduced for buyers with a down payment of less than 20% to make sure they could handle a rise in interest rates.
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12. 2014: Global oil prices plunged by almost 70% in 2014, heavily affecting Canada’s oil-dependent provinces. Alberta was forced to cut oil production, which led to an increase in unemployment and declining home prices. Canada’s stock market also took a hit, with the S&P/TSX Composite Index dropping around 20% that year.
13. 2016: As part of Canada’s climate strategy, the country began implementing carbon pricing. The 2016 Pan-Canadian Framework on Clean Growth and Climate Change required all provinces to put their own form of carbon pricing in place or use the federal carbon price, which increases over time. The policy remains mired in controversy: critics say it increases prices for consumers, while proponents say it encourages clean energy.
14. 2017: Hoping it would curb speculation and cool an overheated housing market, the British Columbia and Ontario provincial governments introduced their own versions of a foreign buyers’ tax in the cities of Vancouver and Toronto. The policy helped stabilize prices in the short term, but it was susceptible to multiple tax loopholes. The housing market continued to skyrocket over the next few years.
15. 2018: Serious concerns arose that if interest rates jumped, highly indebted Canadians would have to start cutting consumer spending to make payments on their mortgages, which could hurt the economy as a whole. So the Office of the Superintendent of Financial Institutions (OSFI) expanded the mortgage stress test for all buyers, which increased qualification standards for loans.
16. 2018: On Oct. 17, cannabis became legal in Canada. Legalization created huge new investment opportunities in the cannabis sector. Multiple cannabis stocks went public and climbed to lofty heights in anticipation of huge consumer demand—but once the reality set in, those same stocks cratered. Investors who timed the market right—which was nearly impossible—saw hefty returns. For most others, the volatility was a good lesson that slow and steady usually wins the race.
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17. 2018: Transitioning to more protectionist policies, the United States initiated a renegotiation of the North American Free Trade Agreement (NAFTA)—brought into force in 1994. The Canadian government worried it could significantly affect exports to the country’s largest trading partner. The conflict led to a short-lived but dramatic trade war. Canada, the United States and Mexico ended up negotiating a new trade deal—the United States–Mexico–Canada Agreement (USMCA)—which includes a sunset clause after 16 years.
18. 2019: The federal government was concerned about retirement security, with the decline of workplace pension plans and Canadians’ low savings rate. So, it expanded the Canada Pension Plan (CPP). The public pension plan will grow to replace 33.33% of Canadians’ average work earnings, up from 25%. Over the seven-year roll-out of the program’s enhancement, CPP contributions will also continue to increase.
19. 2020: The COVID-19 pandemic swept through the world, and it had dramatic repercussions on the economy. The federal and provincial governments enacted various degrees of lockdowns across Canada to try to contain the virus’ impact.
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20. 2020: The government spent hundreds of billions of dollars to pay for benefits that encouraged Canadians to stay home and practice social distancing, most notably, the Canada Emergency Response Benefit (CERB), which was a $2,000 taxable monthly payment. The government also loaned huge sums to businesses to support them through lockdowns that prevented many from operating. The high spending level is one of the factors that led to runaway inflation over the next few years.
21. 2021: Saving rates increased significantly during the pandemic at the same time that the Bank of Canada dropped interest rates to historic lows. Those factors and others led to a boom in Canada’s housing market. Previously, high prices had been mostly limited to major cities, but 2021 saw housing prices rise across the nation, exacerbating long-standing housing affordability issues.
22. 2021: The huge supply of money that entered the economy during the pandemic due to government spending and borrowing, plus supply chain disruptions, led to a dramatic increase in inflation. Houses, cars, groceries and other daily essentials all rose significantly in price.
23. 2022: The Bank of Canada started hiking interest rates rapidly to try to tamp down runaway inflation. Housing prices stabilized (and even fell slightly), but affordability remained an issue as some borrowers’ mortgage payments increased, even doubled. The stock market entered a slump, while prices on everyday goods like gas and groceries remained high, leading to frustration for many Canadians.
24. 2023: The federal government continued to increase its immigration targets to unprecedented levels, letting in millions of international students and low-wage, low-skilled workers under temporary worker programs. The surge in population challenged Canada’s already-tight housing market and strained health-care systems. Wages, which had begun to rise shortly after the pandemic because of labour shortages, started to stabilize. Widespread support for immigration, which had for decades been positive, began to waver.
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25. 2024: The federal government loosened up mortgage rules aimed at first-time home buyers, due to growing discontent with housing affordability. Insured mortgages can now be amortized for 30 years instead of 25, and the price cap for insured properties is now $1.5 million instead of $1 million. These new rules will most likely affect those who haven’t been able to save up a large down payment but have high monthly cash flow.
