Canada needs 'to chart a course toward financial resilience'
19.5 million – that’s the number of Canadians currently facing financial vulnerability, according to a recent report from the Financial Resilience Institute.
Overall, 76% of Canada’s population has some level of financial vulnerability.
Canada's mean financial resilience score in June 2023 stood at 52.44, with Canadians at the national level “approaching resilience”, according to the Seymour Financial Resilience Index. However, 18% of Canadians are in the extremely vulnerable level, with scores of between 0 and 30 on the index. And 89% of the extremely vulnerable households have a negative or zero household savings rate.
The latest index “highlights the financial vulnerability and stress faced by many Canadians," says Eloise Duncan, CEO and founder of the Financial Resilience Institute.
Half of Canadians are “overwhelmed” by debt, according to a previous report from the National Payroll Institute (NPI).
Canadians have had a rough time with their finances, according to the Financial Resilience Institute’s survey of over 5,700 Canadian households.
Overall, 42% of Canadians are currently facing significant financial hardship, and 23% of families are unable to meet their essential expenses.
Sixteen percent of households have been unable to get or afford the food they need, and this is the case for 44% of “extremely vulnerable” households.
Housing affordability is a problem for 55% of Canadians, and this issue is particularly acute for 82% of 'extremely vulnerable' and 69% of “financially vulnerable” Canadians.
As a result, one-third of Canadians have increased their borrowing to pay for essential expenses, and 42% have had to reduce their savings to meet their debt obligations.
Only 50% of Canadians currently maintain a liquid savings buffer of three months or more as of June 2023, down from a high of 64% in 2017. Nearly a quarter of the population (24%) has a buffer of less than three weeks, and 37% of Canadians have either a negative or zero household savings rate.
This brings pain to Canadians’ health: 52% of households are experiencing high levels of financial stress concerning their current and future financial obligations, up from 43% in June 2022.
Three in five (60%) Canadians report that the high cost of living is negatively impacting their quality of life, and 49% report that money worries make them physically unwell.
Money remains the top stressor for Canadians for the sixth year in a row, according to a previous FP Canada report.
"It is crucial to recognize the financial challenges encountered by significant portions of our population and to bring to the forefront the need for Canada to chart a course toward financial resilience,” says Duncan.
To help out workers, employers must implement a financial wellness program, notes Graystone Consulting, from Morgan Stanley.
“When implementing a program, be sure it is tailored specifically for your employees,” it says. “For instance, a recent survey showed half of employees spend more than they earn each month; therefore, resources on budgeting could be highly beneficial for these folks. Another idea is to focus on debt management, given that 37% of employees say they have more debt than they can manage.”
Graystone Consulting notes that employees do not only need help from their employers – they actually want it.
“The good news is that employees want help in their financial lives – and you are in a position to help them. Providing a holistic and comprehensive financial wellness program can help reduce stress in the workplace, improve company culture and strengthen your bottom line. Because when your employees thrive, your business thrives.”
Two in five employees are working extra hours due to the cost-of-living crisis, according to another study.
