This year has helped to improve household finances but uncertainty is weighing heavily and disrupting retirement goals
An upside to the turmoil and sadness that has made 2020 a year we will all be happy to exit, is the ability of many Canadian households to curb their spending.
While job losses have been significant, those that have remained on the payroll say that they are financially better off than they were pre-lockdown as commuting, childcare, and other expenses tumbled.
In fact, a survey from the Canadian Payroll Association (CPA) shows that 62% of respondents were able to save 5% or more of their paycheque. That’s up from 59% last year and corresponds with a 6% drop in the share who said they are living precariously paycheque to paycheque.
But not all is rosy in Canadian households.
Financial stress
Running counter to the boost to bank balances, is a rise in financial stress as 2020’s uncertainty about the economy and the future of work dominates.
CPA’s 12th Annual Survey of Working Canadians reveals that 43% of respondents are financially stressed and just 22% say they are comfortable.
"It's hard to separate the statistically significant growth of workers who are financially stressed, from the COVID-19 pandemic," said Peter Tzanetakis, President of the Canadian Payroll Association. "For over a decade, the financial wellness of working Canadians has been directly linked to core, stable, long-term factors. While the pandemic has forced many to refrain from spending beyond their means and save more, it simultaneously created drastic uncertainty about how the economy will endure into the future."
Inflation is a concern of almost two thirds of respondents (47% in 2019) while the ability to retire is worrying 52% (45% in 2019).
But the biggest fear is recession. For those that are ‘comfortable’, 63% said they are concerned about recession. This rises to 66% of ‘stressed’ respondents and to 73% among those who are ‘coping’.
Impact of financial stress
Financial stress does not just affect individuals. Their work and families are also impacted.
The survey shows that 69% spend time at work worrying about personal finances, resulting in an estimated loss of productivity of more than $20 billion.
"The costs of increased absenteeism, decreased motivation, strained relationships with colleagues, and turnover that many respondents cite as consequences of financial stress, also need to be taken into account,” added Tzanetakis. “Simply put, it's smart business for organizational leaders to pay attention to and support the financial wellness of employees."
More than three quarters of respondents said they had been forced to forego at least one element of holiday joy (e.g. gift-giving or attending parties) due to financial stress.
