A growing focus on financial wellness

27 May 2019

As Canadian’s struggle with mounting debt, higher expenses and planning for retirement, the need to understand what constitutes financial wellness or financial well-being has become an important focus particularly for organizations and businesses. Financial stress and anxiety remain a prevalent issue with far reaching implications. The side effects of poor financial health can include stress-related illness, decreased work productivity, absenteeism, marital conflict, depression and anxiety. All these issues can negatively impact productivity and positive outcomes in the workplace. It is no surprise that businesses have taken the charge in bringing financial wellness programs into their organizations.

Achieving financial wellness is deeply interconnected with comprehending the mental and emotional toll financial stress takes on people. Canadians report that their personal finances are the leading cause of stress in their lives. Forty-one per cent of Canadians overall cite money as their biggest problem, and this number rises to 60 per cent for Canadians with low incomes (under $40,000)¹. Effective programs to help Canadians feel better and cope more effectively with their financial situations require a tailored approach and understanding that the stresses and impacts can be quite different for those living on low incomes versus those with higher incomes who may face different worries and circumstances.

Described by the Conference Board of Canada, financial wellness consists of financial health - objectively an individual’s financial situation - and financial well-being - an individual’s subjective attitude about their situation and their ability to make decisions about it ². It follows that a high level of financial wellness is typically driven by a high level of resources and confidence in how to manage money. Conversely, low levels of financial wellness are driven by a lack of resources and stress about money.

Key drivers of financial wellness programs include deepening financial literacy and confidence surrounding money, but this alone is not enough. The application of knowledge both in the short-term and long-term as well as fundamental behaviour shifts are necessary. Creating healthy financial habits include budgeting (managing debt and expenses), saving, investing and planning for the future.

An important aspect of financial wellness is savings behaviours. Preliminary findings from Canada’s 2018 Financial Well Being survey³provide evidence of the importance of two linked behaviours, an active savings behaviour and reducing reliance on credit for daily expenses as key to improving financial wellness. Interventions include workshops, financial coaching and financial counselling on budgeting, debt control, saving and how to avoid relying on credit.

For people living on low incomes, many of whom lack access to a financial advisor or a workplace financial wellness program, financial support interventions can be critical.

Community based organizations like The Working Centre (TWC) in Kitchener-Waterloo, Ontario have stepped up to play this role through unique services such as the Financial Empowerment and Problem-Solving program (FEPS). The FEPS program has helped many people get on the path to financial wellness. One such example is James who despite being a fit, older worker who had always supported himself, found that a move from Saskatchewan to Ontario was more challenging than he anticipated. Employment and housing were difficult to find, and his savings diminished quickly. When he first visited TWC he was living out of his truck and eating at soup kitchens, unable to access the local men’s shelter because he hadn’t been a resident long enough. Over a few weeks, FEPS workers helped James navigate access to social and emergency assistance, for which he was eligible, and process and electronically file his 2017 tax return. He started meeting with an employment counsellor also at TWC and shortly after found employment. He reported feeling much less stressed and shared with his FEPS worker that he was planning to use his first paycheque for a deposit on an apartment.

Becoming financially secure and stable was necessary for James to feel a sense of moving toward financial wellness. For many other Canadians, whether through programs like FEPS or employer-driven financial wellness programs, understanding the link between skills such as budgeting, saving and planning for retirement and how they all relate to overall well-being is crucial. Actions should continue to be focused on financial knowledge, financial health and preparing for retirement all with the mindset that different people require different interventions depending on their particular financial situation.