The COVID-19 pandemic has shown us how a crisis of this magnitude can crack open processes, systems and beliefs and expose their flaws. Canadians’ financial health is no exception.
For years, advice on how Canadians can ensure their security by saving for a rainy day and avoiding too much debt have been largely brushed off.
Just as this crisis was beginning to wreak havoc on people’s bank accounts, 49 per cent of Canadians surveyed for the quarterly MNP Consumer Debt Index said they were $200 or less away from being able to settle their bills, of which 25 per cent said they were already behind on their debt obligations.
With the economic uncertainty many Canadians now face, we’re dealing with the uncomfortable reality that millions of households could see their life goals crumble. Even worse, they could face bankruptcy.
It begs the question: Knowing that so many Canadians were in fact not financially well, why hadn’t there been a more concerted effort to address it? What have we missed? And what lessons can we learn and apply as we move toward a post-COVID-19 world?
We can point to several economic factors – wage stagnation, rising expenses, etc. – that have contributed to this financial burden, but there’s a more rudimentary consideration. The way we’ve been addressing personal finance has been too myopic. Also, for too long we’ve approached financial security as something exclusive rather than inclusive and essential for our overall well-being.
We’ve heard the term “financial literacy.” Those in the personal finance world will impress the importance of financial knowledge, which can be achieved by reading the countless articles, blogs, webinars and books available on the topic.
But, knowledge alone is not enough.
“Financial wellness” is achieved when people can apply financial knowledge confidently to manage their economic lives effectively. That includes making good financial decisions, spending within one’s means, planning adequately for emergencies and preparing for the future.
If any one of the pieces – knowledge, confidence or implementation are missing – financial wellness is at risk. And with that comes emotional stress, loss of sleep, a decrease in productivity and relationship tension.
In fact, 41 per cent of Canadians surveyed for an FP Canada report said that money is the leading cause of stress in their lives. And a recent survey by Morneau Shepell showed that for 27 per cent of Canadians, the greatest contributor to their mental health was the fear of the financial impact due to COVID-19 – more than getting sick, losing a loved one or loneliness.
If we want to tackle financial wellness, there needs to be a holistic approach to personal finance. To address stress, financial wellness can no longer be ignored. This will require a shift in the mindset.
That’s because personal finance topics have historically been seen from a “specialty” lens and not a “universal” lens. The skills needed to be well financially are widely believed to be, and for the most part are, exclusive to the few who’ve studied it and worked in the world of finance. Financial wellness education is not truly accessible to the masses nor is it discussed widely by corporations or the media. It’s not yet seen as something integral to people’s well-being.
A case in point are our book stores. The well-being section is filled with an array of self-help and mental health books. But if you‘re looking for a book on anything money related, you’ll be forced to go to the business section.
Many Canadians aren’t interested in business, but they do care about their wellness and understand that managing money properly is required to live a healthy and happy life. Yet, the signal we send to them is that learning these essential skills requires a “business” approach.
Financial advisors have a custodial duty of people’s finances. After all, they’re more financially literate and know the steps needed to help people achieve their financial goals. But financial wellness is still a personal responsibility – even with the support of an expert.
Helping clients build their knowledge and confidence will empower them. Showing them how money fits in the “wellness wheel” will make finance more relatable. In turn, they will be better partners and advocates for the advisor’s role in their own well-being
But let’s not forget that people are hesitant to speak about their financial situations and the challenges they face. They feel embarrassed that they don’t know more and not sure whom to turn to for help.
Discussing one’s personal finances is seen as uncouth – more so with women than men. Even couples admit they would rather talk about sex and death before talking about money.
To create households, communities and a country that are financially well, we must make discussing money the norm. We must make it mainstream. We must erase the shame and stigma that comes with it and we need to integrate it properly with any well-being strategy.
It wasn’t so long ago that discussing mental illness was taboo. Today, there’s tremendous amount of focus, discussion and dollars being put behind it. Judging by how many Canadians are stressed about their finances, isn’t it time we take the same approach to financial health?
Saijal Patel is founder and chief executive officer of Saij Elle, a financial consultancy and education platform that aims to help women create financial independence and security, financial services institutions serve the needs of female investors better and companies build effective financial wellness programs for their employees.