The Summer 2022 Financial Wellbeing Index finds that 29 per cent of Canadians are concerned about their ability to cover basic living expenses. While this is not a concern for 47 per cent of those surveyed, respondents under 40 are more concerned than average. They are 75 per cent more likely than those over 50 to worry about making ends meet.
A report recently released by LifeWorks, part of TELUS Health, confirms that the Index has dropped to 64 from 65.2 in Winter 2022. The LifeWorks survey is based on a survey of 3,000 Canadians conducted between July 7 and 13, 2022. It shows that Canadians’ financial wellbeing is at its lowest level since the index was launched in January 2021. It has been steadily declining since the pandemic peaked in the summer of 2021.
Quebec is the only province whose financial wellbeing score (68.4) improved, the Summer 2022 Index report indicates. Saskatchewan’s score dropped five points from Winter 2022, while Newfoundland and Labrador had the lowest score at 60.6. This represents a decrease of almost four points from the previous period.
The proportion of Canadians reporting a worsening financial situation is 5 percent higher than in the Winter 2022 Index. The proportion reporting financial concerns rose by 6 per cent since Winter 2022.
Women and younger people hit hardest
The Summer 2022 Financial Wellbeing Index report notes that all financial sub-scores declined compared with the Winter 2022 Index. The Financial Perception score, which reflects employees’ perception of their wellbeing, showed the largest decline, from 58.7 in Winter 2022 to 56.7 in Summer 2022.
The report also finds that women, people under 40, parents, and households with annual incomes under $60,000 had lower scores on all aspects of financial wellbeing.
In addition, women have a much poorer perception of their financial situation than men do, with a score of 53.6 versus 59.8. Financial perception scores improve with age, the report notes. There is a significant gap between younger and older people in terms of their view of their financial situation. Participants in their 20s had a score of 44.4, compared with 70.7. for participants aged 70 to 79.
Inflation to blame
Inflation was already weighing on the Fall 2021 index results. Canadians who participated in the Summer 2022 Index survey cite groceries, gas and housing as the areas that inflation has affected the most. “The last quarter has been riddled with heightened financial concerns as inflation, interest rates and overall cost of living have significantly increased," says Idan Shlesinger, President, Retirement and Financial Solutions, and Executive Vice-president of LifeWorks.
Inflation is most apparent at the grocery store, 50 per cent of survey participants believe. Thirty-five per cent say inflation has had the greatest impact on the cost of gas, while seven per cent say inflation has hit housing the hardest, and five per cent rank debt repayment first.
The July 2022 survey, for example, asked homeowners if they would be concerned about their ability to meet their mortgage payments if the Bank of Canada raised its interest rate above three per cent. Nearly one quarter (23 per cent) said yes, and 17 per cent said they are unsure about their ability to pay their mortgage in that scenario. The report notes that both groups have financial well-being scores well below the national average of 64.0. Incidentally, the Bank of Canada raised its key interest rate to 3.75 per cent on October 26, 2022.
About one third of homeowners (33 per cent) do not have a mortgage on their home. This group has the most favourable financial wellbeing score, at 78.2. This score is 14 points higher than the national average of 64.0.
Employers to the rescue
Global Director and Senior Vice President, Research and Total Wellbeing at LifeWorks, Paula Allen calls on companies to take action. “As the financial wellbeing of Canadians reaches its lowest point in 18 months, it’s important for employers to remember that actions always speak louder than words when it comes to support," she says. Allen sees investing in financial education and providing access to financial programs and services as critical first steps for employers.
“Financial wellbeing plays a monumental role in overall wellbeing, and also impacts work productivity,” adds Allen. She believes that organizations that prioritize wellbeing can advance well ahead of their competitors in the months and years to come.
Company size also seems to play an important role in how employees perceive their financial situation. People who work for organizations with 1,001 to 5,000 employees have the most favourable financial perception score, at 59.7. Managers have a lower financial perception score than non-managers, at 56.2 versus 56.9.
Financial Planning essential
What’s more, individual Canadians do not know where to find advice. According to the Summer 2022 Health and Wellbeing Index report, 47 per cent of Canadians are unsure about how to choose a financial planner. These respondents have financial wellness scores that are significantly lower than the national average, the report points out.
In response to these uncertainties, Paula Allen emphasizes that advisors play a critical role in helping investors deal with inflation. “A financial advisor is able to look at your personal situation and match that with the wide range of options for savings, decisions on when to pay down debt, and how to grow the money that you have,” she explained to Insurance Portal.
The global leader and senior vice-president of research and total wellbeing at LifeWorks also believes advisors can help their clients hone regular saving habits. “They can help with both short- and long-term planning and are more critical during times of financial strain,” Allen says.
Stigma remains
The Fall 2021 Financial Wellbeing Index found that nearly one quarter of Canadians say that embarrassment would keep them from seeking financial advice. At the time, Idan Shlesinger added that financial stigma is a major issue for employed Canadians. He commented that many Canadians would benefit from consulting an advisor about their financial situation. Yet many investors are expressing hesitancy, Shlesinger says, “which is leading to a self-stigma that is impacting mental health and overall wellbeing.”
Allen told Insurance Portal that the stigma remains today. “The stigma has been long standing and there really hasn’t been much in society to deal with it. We would be surprised to see any change since Summer [2022]," she says.
Knowledge is the key to reducing stigma, Allen adds. She points out that people who seek financial advice do three times better than their peers with the same amount of money. Another important type of knowledge is “knowledge that there is no shame running into some difficulty every once in a while. It is common and just like when you run into difficulty with your health or your home or your vehicle, professional help may be needed,” she explains.