NORTH VANCOUVER, BC–While slightly more Canadian households are financially resilient amidst the COVID-19 pandemic, according to Seymour Management Consulting Inc.’s October 2020 Seymour Financial Resilience Index, there has been an increase in those who are struggling.
The index, published quarterly, measures a consumer or household’s ability to get through financial hardship, stressors and shocks as a result of unplanned life events based on nine behavioural, sentiment and resilience indicators. It is comprised of four “resilience segments”: Extremely Vulnerable, Financially Vulnerable, Approaching Resilience and Financially Resilient.
The mean national financial resilience score for Canada is 54.53 in October, up from 49.58 based on the February baseline (pre-pandemic). This means that overall, Canadians are approaching resilience i.e. reporting financially resilient outcomes across some (but not all) of the indicators. As of October, 28 percent of adult households (7.22 million Canadians) are financially resilient with a financial resilience score of 70.01 or more.
But the October index shows an increase in extremely vulnerable households by 700,000 and an increase in the financially vulnerable populations by another 340,000 households between June and October, with these two segments combined representing 10.64 million adults.
Moreover, women, renters, single parent families, part-time workers, low income Canadians, those not working owing to a disability and those affected by job losses or reduced hours as a result of the pandemic have been negatively impacted in terms of their financial resilience, amongst others. The mean financial resilience score of small business owners and self-employed Canadians has also declined between February and October.
At the same time 77 percent of households report having excellent, very good or good credit scores in October. But underlying this data are trends that belie financial struggles.
–Only 35.7 percent are financially resilient, with 36 percent approaching resilience and 21 percent financially vulnerable.
–Of these same borrowers with strong self-reported credit scores, 63.4 percent are living paycheque to paycheque.
–31.5 percent report their household income has declined by more than 25 percent since the pandemic started.
–45.1 percent have had someone in their household affected by reduced hours.
–50.2 percent have had to draw down their savings to make ends meet.
All households that have accessed federal government COVID-19 financial relief since the pandemic started are less financially resilient than households that have not accessed relief, for all household income demographic groups apart from Canadians with household income under $25,000/year. The October data, said the report, “highlights that Government relief is certainly helping many Canadians to bridge through financially.”
individuals’ difficult financial situations are, not surprisingly, taking their physical and mental toll. In October 52 percent of Canadians reported that financial hardship and/or isolation have significantly impacted their mental health, 45 percent report that money worries make them physically unwell and 38 percent report that money worries impacts their performance or productivity at work. These impacts are much more extreme, said the report, for extremely vulnerable Canadians.
The October index also shows how Canadians’ sentiments and consumer and financial behaviours are changing in the first eight months of the pandemic, with real differences by province and across the four financial resilience segments.
–67 percent of Canadians agree that the pandemic has made them rethink their relationships with money, and 33 percent now worry often about having their household incomes reduced as a result of COVID-19 or a future recession.
–63 percent of households have significantly reduced their nonessential expenses in October, up from 61 percent in June and 42 percent of households have drawn down on their savings, up from 30 percent in June.
–Extremely vulnerable households are working much harder than ever to make it through, with 80.7 percent reporting having significantly reduced their nonessential expenses, up significantly compared to 70.3 percent in June. At the same time 43.6 percent have had to increase borrowing for everyday expenses (up from 31.4 percent) and 66.2 percent have drawn down on their savings, compared to 49.7 percent just three months prior.
–15 percent of households report saving significantly or moderately more now compared to pre-pandemic. But this is 31 percent for financially resilient Canadians) whereas 51 percent of financially vulnerable and 41 percent of extremely vulnerable households respectively are saving significantly or moderately less.
–Canadians have been creative in other ways to reduce their expenses and make ends meet, with 9 percent moving house or changing accommodation to reduce living expenses, 17 percent having sold or pawned something to get by and 11 percent having deferred utility payments.
–Many Canadians are paying down debt or consolidating their debt and reducing their borrowing for everyday expenses. That said, 27 percent Canadians reported that they worry often about managing their overall debt load in October.
The index also showed changes in financial resilience vis-à-vis financial institutions (FIs). 86 percent of Canadians agree that their household is now more aware of the importance of establishing or improving their financial resilience, and 53 percent report that they now have new and/or higher expectations around how their FI could “have their back.”
Customer resilience at the “big five” banks have different distributions represented across the four financial resilience segments. CIBC and BMO have seen the highest increases in their mean customer financial resilience scores at the national level between February (pre-pandemic) and October, followed by RBC, TD and Scotiabank. All banks will have worked hard to support their customers facing financial hardship through the pandemic, and nuances in terms of how best to support their financial resilience can be analyzed through the Index.
From a financial wellness customer support perspective, there are differences across the banks. But at the national level, all bank customers rated their primary financial institution less highly in terms of helping to improve their financial wellness in October 2020 compared to June and February. 40 percent of Canadians rated their primary FI as good or excellent (7-10), compared to 51 percent in February (pre-pandemic) and 58 percent in 2018. BMO followed by CIBC and TD have the highest proportion of customers who rate them as good or excellent at helping to improve their financial wellness.
“What we’re seeing based on the October index is increasing financially vulnerability particularly for households impacted by job losses and/or reduced hours, which are disproportionately impacting ‘Extremely Vulnerable’ and’ Financially Vulnerable’ households, “ said Eloise Duncan, CEO and founder of Seymour Management Consulting. “Based on our data, of concern is how some households, despite working harder to adjust their behaviours to make ends meet and having accessed Government COVID-19 support and/or payment deferral programs or other help to bridge through, are still falling behind, with their financial resilience scores worsening. Incidentally more of these people are also feeling less well supported by their primary Financial Institution, and/or are having difficulties in accessing financial services, education, advice or help.”