Three in 10 Canadians in worse financial shape due to pandemic

TORONTO- A new study reveals a decline in the overall financial health of Canadians since the pandemic.

Morneau Shepell, a leading provider of total wellbeing, mental health and financial wellness services,  released the results of the Financial Wellbeing Index™ report on Feb. 11.

The report analyzes the financial health of Canadians by a range of demographics, geographies and industries, as compared to a pre-2020 benchmark.

The Financial Wellbeing Index™ score for Jan. 2021 is -2.8.

A negative score indicates a lower level of financial wellbeing among working Canadians compared to 2019, whereas a positive score indicates improvement.

A notable difference in financial health is observed between those identifying as female reporting a significantly lower score (-5.1) compared to those identifying as male (-0.6), with males even reporting improvement in certain areas.

This is observed across all areas that make up financial wellbeing scores, in particular for financial knowledge (-5.6 for females vs. +1.9 for males), impacts on work productivity (-2.9 for females vs. -1.7 for males), financial behaviour (-4.7 for females vs. -1.9 for males) and perceived financial situation (-5.3 for females vs. +0.2 for males).

“Employers are typically not aware of the amount of diversity in financial wellbeing in their population. People with the same salary could have vastly different levels of knowledge, different financial behaviours and very different perceptions of their financial situations,” said Idan Shlesinger, president, retirement solutions and executive vice president.

“It is clear that financial wellbeing impacts mental health and work productivity, but a one-size-fits-all approach will not work to improve it. Rather, employer-based solutions need the flexibility to adapt to the diversity in situations and priorities that exists within populations.”

The report found that since the beginning of the pandemic, almost twice as many individuals surveyed believe that they are doing worse in terms of their financial situation (27%) than those who indicate they are doing better (15%). The situation is not improving, as one in five individuals (21%) report increased financial concern than when compared to the prior three months.

Proactive approach

The research found that some Canadians are taking a more proactive approach to their finances, with 14% of respondents indicating they are educating themselves more on financial matters than in the past, and 11% prioritizing financial contingency planning.

Canadians’ perception of their financial situation appears to be impacting their wellbeing as well.

The survey found that individuals reporting reduced salaries when compared to the prior month have the lowest financial wellbeing score (-18.0), followed by those who report fewer hours when compared to the prior month (-10.6). Surprisingly, the financial wellbeing score of those who are not currently employed seems to be impacted less (-4.6), potentially as a result of government supports or reduced expenses.

“Financial wellbeing is much more complex than income or even savings. Through the pandemic, many people have been saving more by default, but since this action has not been intentional or planned, it may not be beneficial in the long-term and we could see a surge in spending when the economy reopens as a way to make up for lost time,” said Paula Allen, global leader and senior vice president, research and total wellbeing.

“The good news is that we are also seeing more openness to information and actions that can improve our financial wellbeing. With this, and with access to the right tools, financial guidance and support, there is a great opportunity to have the crisis of the pandemic put us in a better place long term, after we get past this initial strain,” Allen added.

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