On COVID's anniversary, how have Canadians' finances held up?

FP Canada survey highlights how varied impact on income, expenses, and work across Canada has reshaped financial priorities

On COVID's anniversary, how have Canadians' finances held up?

One year after the World Health Organization officially declared COVID-19 as a global pandemic, FP Canada has published a new report exploring the diverse impact it has had on Canadian households.

Drawing from a Leger survey of more than 1,500 Canadians, FP Canada’s Tale of Two Pandemics report has found that while many have been unaffected or ended up better off financially, a large minority of Canadians have been negatively impacted by COVID-19.

Overall, around one third (34%) of Canadian households have seen an increase in expenses over the past year, and one quarter (24%) said they have been unable to save money. Among those who were working at the outset of the COVID-19 pandemic, two fifths (39%) said they’ve suffered a job loss, a pay cut, or a reduction in work hours.

The report also showed the benefits of having a professional financial planner. Canadians working with a financial planner, for example, were more than twice as likely to report having enough for at least one year’s worth of expenses to fall back on. Two fifths of respondents (41%) said they have less than six months’ worth of living expenses stashed away; that figure was markedly higher among those who weren’t working with a financial planner (47%) compared to those who do (28%).

“When times are good, a sound financial plan will help you reach your goals, and when times are tougher—like the COVID-19 pandemic —it will provide the protection you need to get through it,” says Wendy Brookhouse, a qualified associate financial planner (QAFP) and founder of Black Star Wealth. “It’s never too early or too late to start planning, no matter your age, career stage, or income level.”

The survey findings also indicated that 30% of Canadians who use a financial planner can adapt quicker to changing financial realities, which helped prevent their household expenses from rising during the pandemic. Those who work with a financial planner were also less likely to report an increase in expenses than their unadvised counterparts (28% vs. 37%).

“Certified Financial Planners have helped clients adapt to financial realities and keep expenses in line by assisting clients with creating and sticking to a budget,” Stephanie Douglas, CFP professional and Partner and Portfolio Manager at Harris Douglas Asset Management told Wealth Professional. “Having a budget and keeping track of finances allows people to have a better grasp on their spending which helps in the scenario that there is a reduction in income or if there are larger-than-expected expenses to prioritize where to spend and what areas can be trimmed.”

The survey responses also point to a much heavier impact on Western Canada, with the Manitoba-Ontario border acting as a figurative dividing line. Already suffering from the consequences of collapsed oil prices, half of Western Canadians who were working at the start of the pandemic (49%) said that the crisis has hurt their professional lives, compared to just one third (34%) of Eastern Canadians.

Among workers across Canada, those in Alberta suffered the harshest blow: one fourth said they’ve had to reduce their work hours (25%), and nearly as many said they’ve been forced out of the labour market (24%). Twenty per cent of respondents in the Prairies said they have experienced a pay decrease in the past year, slightly more than those in other provinces on a percentage basis. Focusing on Eastern Canada, Ontarians were the most negatively impacted professionally, with two in five saying their professional lives have suffered in some way over the past year.

“Going forward, I think there will be a lot more emphasis on not only having an emergency fund but how large an emergency funds needs to be,” Douglas said. “While traditionally having three to six months in living expenses available was seen as sufficient, it may be advised, for example for Canadians that have more precarious work situations or are in niche industries with skillsets that are not easily transferrable, to have a larger emergency fund.

And while record-low interest rates may have had some Canadians questioning the wisdom of saving three to six months’ worth of expenses in a buffer cash fund, Douglas said that could be changing.

“I think more people are realizing the value of having that cash and the peace of mind that it can bring, particularly as many Canadians take on larger debt loads and are heavily dependent on their incomes to fund that debt,” she said. “Understandably, there are more feelings of job insecurity these days, and I think loss of income will become an important focal point when doing financial plans even after COVID-19.”


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