According to a recent study conducted with Queen’s University, financial stress has tripled since 2009. Today, personal debt in Canada is approaching record highs and is continuing to increase. A 2012 survey by the Canadian Payroll Association discovered that 47% of Canadians would experience financial difficulty if they missed even a single paycheque.
What financial concerns are stressing Canadians out? It’s not about vacations or lifestyle luxuries. They are concerned about fundamental issues such as making their monthly mortgage and car payments, having enough money for their children’s education, paying down their credit card debt and managing their finances for a secure future. Many Canadians are dipping into retirement savings, remortgaging homes or working two jobs to keep their heads above water.
All of this financial stress weighs heavily on an individual’s mental and physical well-being. Those who find themselves deep in debt are often unwilling or unable to share the burden with family or friends. This leads to feelings of isolation and shame, which, in turn, can lead to sleep deprivation, irritability, weight gain and inability to focus. According to Health Canada, serious stress issues that are not resolved may even result in errors in judgment, personality changes or serious illness such as heart disease.
A survey by Desjardins Financial Security revealed that 61% of respondents listed money as a source of stress. Inevitably, financial stress of this magnitude is affecting the workplace.
According to the Psychology Foundation of Canada, overwhelming stress of any kind can negatively affect an employee’s ability to concentrate, meet deadlines, make decisions and manage professional relationships. And it’s not just the employees who are affected. There are bottom-line consequences for employers as well, including increased health benefits costs and absenteeism as well as decreased productivity.
Employers need to provide their staff with greater financial literacy education as a means to show tangible support around their leading life stressor. Most people have never received formal financial education, from basic budgeting concepts to the most complex investment strategies.
Whether the individual is a spender or saver or a low-income earner, or receives an executive level income, workplace financial literacy is an invaluable tool. The Government of Canada finds value in financial literacy as well. Recently, it named Jane Rooney as the first financial literacy leader for the Financial Consumer Agency of Canada. “In today’s global and complex financial world, financial literacy is more important than ever,” said Kevin Sorenson, minister of state (finance), at the time of her appointment.
Within the workplace, companies believe their employee assistance program (EAP) is able to provide the right type of financial help when the need arises. Is this really the case? Typically, the financial assistance component focuses on retirement savings and investment advice, while many employees are living paycheque to paycheque and cannot even contemplate investing for retirement.
Canadians who are struggling to pay their bills and plan for retirement want financial education and the information and tools to implement debt reduction strategies. Given Canadians’ debt loads and the number of employees worried about their personal finances, employers have the opportunity to play a proactive role by creating a new EAP or adding this new element to existing EAPs. They can teach employees the skills needed to address financial issues from budgeting and credit management education to debt reduction and savings strategies.
What benefits can an employer expect by including a financial literacy program in their EAP? One benefit is an increase in employee retention. Debt-stressed employees may be tempted to switch jobs for a slight raise in pay, thinking the extra income will cure their financial woes. Teaching employees about the value of a comprehensive benefits plan and the positive aspects of on-the-job seniority often helps them to see beyond their take-home pay.
When employers support their financially stressed employees, the benefits to the employers are tangible. A study by the Personal Finance Employee Education Foundation showed that employers that implement a comprehensive form of financial education in the workplace receive a three-to-one return on their investment through a decrease in healthcare costs and an increase in workplace productivity.
When an individual’s money issues become manageable, their stress levels go down and their engagement goes up. All in all, EAPs can provide the necessary support leading to healthy finances, satisfied employees and a profitable future.
Doug Jones is a partner and senior vice-president with BDO Canada Ltd. The views expressed are those of the author and not necessarily those of Benefits Canada.