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By Tanya Oliva
Special to the Financial Independence Hub
Prior to the pandemic, the financial health of Canadians was of great concern to the Bank of Canada, who often cited the record level of household debt as a serious threat to our economy. In 2019, the average Canadian household was carrying $1.76 in debt for every $1.00 of disposable income.
Other statistics related to the financial health of the average working Canadian were just as alarming: 52% were living pay-cheque to pay-cheque, 44% say it would be difficult to meet financial obligations if their pay was late, 40% were overwhelmed by their level of debt, and 48% were losing sleep because of financial worries.
We all know now that the COVID-19 Pandemic of 2020 is the gravest economic and financial shock anyone could have imagined. With no time to prepare, millions of Canadians and countless businesses are facing extreme financial stress and a global economic recession has taken hold. Now, more than ever, Canadians must focus on their financial health.
We need to think of health as a three-legged stool
Our overall health is connected on three levels: physical health, mental health, and our financial health. Financial challenges and difficulties are experienced by individuals across all income levels and age groups. Financial stress is the most obvious symptom and proves that financial health is strongly linked to our mental health.
Poor financial health can lead to more serious mental health issues such as anxiety and depression and can also negatively impact our physical health, from fatigue, poor nutrition, to substance abuse and dangerous conditions like high-blood pressure and heart disease.
A state of being in good financial health is when an individual:
- has control over their day-to-day, month-to-month expenses,
- has the capacity to absorb a financial shock,
- is on track to meet financial goals – short, medium and long term, and
- has the financial ability to make choices that allow them to enjoy life and seize opportunity.
Just like our physical and mental health, we need to put in the time, effort and commitment, and apply proven strategies, to maintain and improve our financial health. The Financial Health Network has created a measure of financial health called the FinHealth Score™. An individual’s score is based on four financial behaviours: how you Spend, Save, Borrow and Plan for the unexpected and your future. Your overall score will change with your circumstances and ranges on a spectrum from financially healthy to financially coping to financially vulnerable.
According to TD’s Financial Health Index, only 27% of Canadians were considered to be financially healthy before the pandemic. And while it is frightening to consider the new reality as we await updated statistics, it would be reasonable to believe that fewer Canadians are now financially healthy and many more have transitioned from financially coping to being financially vulnerable.
Employers have a vital role to play in our financial health
As a primary source of income, employers have a vital role to play in supporting the financial health of their employees. Many employers already recognize the advantages of providing pension and retirement savings plans, health and wellness programs, and other benefits to their employees.
More recently, mental health has become an important focus in the workplace, particularly given the financial cost of employees taking stress leave. Since 59% of employees say that financial matters cause them more stress in their lives than any other life stressor combined (job, relationships, health), a financial wellness program is a natural extension of these existing benefits.
According to the Canadian Payroll Association, 43% of employees say that stress related to personal financial matters impacts their workplace performance and productivity and 20% of employees report that they spend 3.5 work hours per week dealing with financial issues.
Employee financial stress can lead to:
- more absences and use of sick leave
- increased turnover
- lower morale and engagement
- poor working relationships
- lack of focus and poor decision making
For businesses, this lack of focus can result in:
- administrative and financial errors
- more workplace accidents
- production errors
- poor customer service
With these impacts, the business case is clear. It is in an employer’s best interest to help improve the financial health of their employees. A Financial Wellness program cannot be a one-off initiative or simply an educational offering, it must include engagement and personalized support. It requires a holistic approach to support a person’s knowledge & skills (financial literacy), their mindset, attitudes, habits and confidence (financial well-being), and their financial behaviour (financial health).
Engagement opportunities include workshops on key financial health issues (eg. budgeting, debt control, credit management, and saving for both short and long-term needs), information sessions on company pensions and incentive programs, and access to financial counselling to address individual concerns and circumstances.
In a post-pandemic world, improving your employee’s financial health has gone from a “nice to have” to a “need to have”. If businesses act soon enough, they can help their employees recover more quickly from the financial impacts of the pandemic and help them return to a state of good financial health. In addition to improving the bottom line, offering a financial wellness program can also enhance a company’s value proposition as a good employer.
It is time to raise the level of consciousness, conversation, and commitment to financial health. Financial healthier employees make for financially healthier companies and financially healthier companies make for a financially healthy economy. Just ask the Bank of Canada.
Tanya Oliva is a Personal Finance Educator & Expert Money Coach and the founder of Fin$mart™. She is an Accredited Financial Counsellor of Canada. Fin$mart™ provides personalized financial counselling and coaching to individuals and delivers financial wellness to employees in the workplace. Fin$mart promises to deliver clients Clarity, Mastery and Transformation.
