Financial stress is impacting Canadians’ mental and physical health, as well as decisions related to their pension plans, said Matt Davison, Western University’s dean of science and principal researcher, during a session at Benefits Canada‘s 2023 DC Plan Summit.

In an analysis of the National Payroll Institute’s annual survey, Western’s financial wellness lab found respondents’ financial perspectives were characterized by their responses to questions about emergency funding, the use of debt to pay for essentials and the impact of financial stress on work productivity. Respondents were grouped into three clusters of roughly the same size — those who were financially stressed, those who were financially coping and those who were financially comfortable.

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“The question we asked was, ‘If you were to find groupings of those points, would they fit into well-defined groups?’ An awful lot of the fantastic stuff that happens in machine learning nowadays is basically just this. It’s basically saying, ‘When are two things similar and when are two things different and what does that mean?’ And so we did that with our data and we found that there were three groups.”

Over the course of the coronavirus pandemic, there was an increase in the percentage of respondents who described themselves as financially coping, said Davison, noting that, while the overall level of financial stress remained steady, respondents who were already stressed reported increased levels of stress during that time. The financial wellness lab, he added, has found similar results in other surveys, including those from Australia, Norway and the U.S.

“This was before all of the really bad news that’s come up in the last year or so. . . . This is before interest rates went on a roar, inflation was only just starting [and] the Ukraine war had started at the very end of the survey period, but it wasn’t quite in the popular imagination yet.”

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While 54 per cent of respondents earning less than $50,000 per year said they were financially stressed, Davison noted 20 per cent of respondents earning more than $150,000 also reported financial stress, so spend relative to income was a larger determinant than overall earnings.

Marital and family status were also factors: respondents who were single with a child were most likely to report financial stress (46 per cent), followed by those who were single and child-free (44 per cent), married without children (37 per cent) and married with children (28 per cent).

“Income plays a role, but [it’s] not a determining role. . . . [And] definitely, single people with children are struggling more than married people with or without children, but again, it’s not completely determinative.”

In light of the survey results, he suggested employers take a flexible approach to supporting employee financial well-being. “The fact that there are these three very different types of Canadians that we can divide into groups suggests that programs that are designed to fit all of them will probably fit none of them.

“You might be really happy you have a program that’s working and 30 per cent of your members are super engaged. Maybe that’s the 30 per cent of your members that least need to be engaged and the third that really need to be involved are not on the same planet for whatever reason.”

Read more coverage of the 2023 DC Plan Summit.