If there was any question about how employees feel about their financial situation, a recent survey suggests their concerns are only amplifying.
Forty-four per cent of Canadian workers said they are satisfied with their financial situation this year, down from 55 per cent two years ago. And 53 per cent are worried about their future financial state, compared to 46 per cent two years ago, found the survey of 1,349 people by Willis Towers Watson.
The survey also found almost one-third of workers (30 per cent) believe their financial concerns are negatively affecting their lives, compared to 18 per cent two years ago.
However, employees also indicate they’re receptive to education from employers.
“The principal cause of mental health issues is financial stress… so if we’re going to spend all this time, effort and money on mental health programs in the workplace, why don’t we start by addressing the principal cause of mental health issues?” said Frank Wiginton, a certified financial planner based in Toronto.
So what’s behind the changing attitudes? There are a few possibilities, according to Ofelia Isabel, Canadian DC business co-leader at Willis Towers Watson.
For one, there’s been more attention in the media around finances, such as enhancements to the Canada Pension Plan (CPP), so people are discussing the issues more often. Employers have also been moving away from defined benefit (DB) pension plans to defined contribution (DC) ones, so many people don’t have the safety net of a DB plan — if they have a pension plan at all, she said.
Plus, many people are living from paycheque to paycheque, admitting they wouldn’t have extra money should an emergency arise, said Isabel.
In addition, ever since the economic downturn of 2008, there’s been wage depression, and salary increases have not kept pace with inflation, said Shelly Wolff, senior health management consultant at Willis Towers Watson.
“It puts so much more pressure on an employee’s ability to make ends meet, so there a number of macro factors that really have significant impact.”
Financial well-being does not operate in isolation, she said.
“When you have financial stress, it creates overall mental health stress, and can actually create health conditions, especially for long-term, sustainable stress levels — we know that has a very negative effect… these things are all connected.”
It’s a combination of a lot of issues, such as higher debt levels impacting cash flow, pricey mortgages in certain cities, and a society and culture focused on spending, according to Jim Yih, a retirement expert based in Edmonton.
“The governments want spending because it fosters the economy, keeps the economy growing; of course, corporate Canada wants spending because it fuels profitability; and I think consumers like it too — it’s more fun to spend than it is to save.”
There’s also the issue of income volatility as the population enters into precarious work environments, according to Jane Rooney, financial literacy leader at the Financial Consumer Agency of Canada (FCAC) in Ottawa.
“People don’t have emergency savings to draw on when they have financial struggles,” she said.
“We are living in a world where there are less defined benefit plans, more people are responsible now for their own financial future, so there’s a heightened awareness that people need to start saving for themselves. There are government benefits that are going to help support our older Canadians but they’re not going to fully address the needs of a lifestyle that people might want to live in their retirement stage. So it’s (about) people needing and recognizing they’re going to have to save for themselves, and wanting to understand a complex world.”
A simple, compounding factor is the fact that Canadians continue to increase their debt levels, said Wiginton.
“Is that because they’re confident and comfortable with their finances, so they feel comfortable and confident to take on more debt? Or are they taking on more debt because they’re in a worse financial situation?”
People are also taking on massive mortgage debt loads and focusing more of their efforts, energy and money to help pay down debts, along with dealing with higher prices for food or hydro, he said.
Canadians are in this financial fog, just trying to get through it, to survive, said Wiginton.
“There is a lot of frustration out there in the workplace right now about the lack of income growth and income growth opportunity, and I think that that is perpetuating apathy in the workplace. People are looking at it from the standpoint of ‘Companies keep making all this money and all these record profits but I’m not seeing any of it.’”
Seeing Sears Canada fold and people not being paid severance is one example, he said.
“That’s creating some anxiety and animosity… where we’re seeing large bonuses being paid out at the top, very similar to what we saw back in the late ’90s,” said Wiginton. “It increases their anxiety, and creates a negative and in some cases toxic work environment, especially if they’re struggling financially to make ends meet.”
“So we need to look at it and say, ‘Are the things that we’re doing effective, are they impactful? Or are we just wasting our time?’ And if they aren’t effective and impactful, why is that, and how do we change that?”
Employees are asking for more information, and when employers offer financial literacy, it’s saying they recognize employees are stressed, which can lead to higher absenteeism and lower productivity, said Rooney.
“We know that when people are feeling more in control of their money, their health improves and they’re more present at work.”
Using tools that work
About half of employees (48 per cent) said they would like their employers to offer tools that suggest how they can improve their financial situation, according to Willis Towers Watson. But there’s definitely room for improvement, said experts.
“The way we’ve done this in the past, the way we have communicated things to employees, has been very much from a legal perspective: ‘How do I limit my risk?’ Which means we use words like ‘notwithstanding’ in employee communications and we do it in a way that makes nobody want to read it, nobody engage in it and nobody understand what it is we’re trying to say,” said Isabel.
Even if employers offer a generous pension plan, employees often aren’t participating because they don’t know it’s there, she said.
“We have to start treating employees like consumers. If you think about how they engage with technology, how they get information, it’s all bite-sized pieces with graphics and simple language, and we need to start engaging with employees in that exact same way… so let’s stop doing what we were doing before, and talk to people the way they actually like to be talked to.”
It’s also about employers losing the paternalism, and empowering people to have more confidence and control, said Wolff.
“We think about engaging employees now, it is (about) educating them, really helping them understand they have an influence over their financial well-being, and we are a partner as an employer in that effort. So it’s a trifecta way of thinking about this versus ‘We will take care of you,’ because there’s only so much an employer can do,” she said.
“It’s not about the tools, it’s about driving the behaviours, educating people.”
One tool being offered by Willis Towers Watson is FiT Age, or Financial Independence Target Age, which is about driving sound financial well-being behaviours among employees using motivational tactics. It begins with “At what age will I have financial independence?” and doesn’t use complicated math or require people to select investments, said Wendy Poirier, Canadian health and group benefits growth leader at Willis Towers Watson.
“That’s something you can easily understand and grab onto, it’s simple… and that’s resonating really well.”
The FCAC has a variety of tools employers can use, such as an online budget calculator, a financial goal calculator, and videos around financial stress. The organization has also joined up with an organization called BestLifeRewarded to offer incentives to both employers and employees through a Money Fit Challenge focused on financial well-being, said Rooney.
The agency has also partnered with several organizations to develop a best practices framework for employers offering financial literacy programs, and works with Chartered Professionals Accountants to offer financial workshops in the workplace, said Rooney.
“They’re unbiased, they’re not offering a product or service.”
But people won’t become financially literate just by clicking on some links, said Wiginton.
“They need the guidance, the structure, of a properly formatted program, and the problem there is the majority of people who are providing financial literacy, if you will, don’t have that (because) they aren’t people who are educators or know how to create a program that delivers educational effectiveness.”
Many of the tools are piecemeal and focus around the skill set of debt and debt management because that’s where the provider can provide the biggest service, he said.
The biggest part of the fault comes down to the employers that don’t put in the dollars or time to bring in a proper program, said Wiginton, who develops financial wellness programs.
“They keep looking for the quick fix, the inexpensive ‘Let’s put $10,000 into something like this,’ and for $10,000, you can’t get anything — any of the free, quick-fix stuff, you get what you paid for, it’s just a waste of everybody’s time.”
Some tools are good, some tools are bad, and that’s the challenge today, said Yih.
“There’s more choice, more information, more opportunity… but that’s actually created more confusion and information overload… and we’re not sure what to believe and what’s good and what’s not.”
A person could use three different retirement calculators and get three different answers because the assumptions used are different, so “there’s no question it can be challenging,” he said.
That’s why employers can definitely play a role, whether that means having experts come in to educate people on finances, or providing some form of workplace retirement savings plan, said Yih, who runs financial education programs.
“I would love to see, personally, more mandated programs through the workplace. The government’s already talking about enhanced CPP and that’s a good thing because it covers everybody, but if more employers put pensions, RSPs and education into their environments, it would help a lot of people with anxiety, because then they have an outlet, they have an option.”
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