Millions of Canadians are saddled with money and debt problems. Close to 40% of working Canadians say they feel overwhelmed by their level of debt, according to the most recent annual survey by the Canadian Payroll Association. In 2016, household debt reached 171% of disposable income, reported the Office of the Parliamentary Budget Officer, making us the most indebted member of the G7 nations. And it’s clear from the Canadian Payroll Association survey that not everyone is feeling comfortable with the money they owe.
Poor financial health: Canadians’ Achilles’ heel
Canadians have high levels of debt and financial discomfort and insecurity, and low levels of savings and financial knowledge — so our financial health picture looks a bit grim. And this is all the more true when you add in a most closely related impacts: the stress that financial troubles bring.
Health problems and lost productivity
Excess stress can contribute to chronic physical illness such as high blood pressure, hardening of the arteries, diabetes and obesity, and can also lead to mental health problems. Lost productivity for businesses is another adverse affect that shouldn’t be overlooked, because “presenteeism” — where employees report to work but are less productive due to their financial or other stresses — is a reality. Mental and physical health issues may lead to temporary absences and disability claims, resulting in a significant cost for businesses.
The good news is it's possible to reduce the impact of this stress and tackle the root causes of the problem — and employees are looking to their employers to play a role in their financial health, according to a survey by Sun Life Financial Group Benefits. So businesses need to promote financial literacy, ideally combining it with real-life scenarios and options for tangibly changing behaviours. Research has shown this has a favourable effect on wealth and that financially knowledgeable people are more likely to plan, save, budget and control their spending. What's even more important is that these good habits carry on into retirement.
How can employers help?
If you’re an employer, taking action pays big dividends, for both your employees and your business — and it’s easier than you think and. Follow these 3 steps:
- Evaluate the situation based on available sociodemographic data.
- Set realistic goals.
- Implement tools and make adjustments as required.
Put support programs in place that provide education and encourage behavioural change, including:
- Creating employee awareness through an annual campaign on a variety of meaningful topics, such as retirement planning, family finances and estate planning.
- Organizing education sessions and follow-up surveys. These can take the form of seminars on various financial health topics, workshops, or digital tool demos. To make this tactic more goal-oriented, employers can give their employees an action plan to implement within a specific period.
- Encouraging employees to use existing tools, such as a financial check-up. A few simple questions will help them assess their spending, borrowing, saving and investing habits.
- Urging employees to meet with an advisor. Personal, one-to-one coaching and planning can make a big difference to your employees’ peace of mind.
You can pair these tactics with incentives such as adding a group TFSA to your current retirement program or promoting greater use of existing investment vehicles. And why not make use of behavioural science to nudge employees into changing their habits, by requiring them to “opt out” of saving more or joining a plan, rather than encouraging them to “opt in”?
When businesses help employees take charge of their finances, they see improvements in employee health and productivity — and they keep a lid on benefit costs. Definitely something to think about.