In a Globe and Mail article on October 2nd, drawing on information sourced from the Conference Board of Canada and BDO, Michael Babad laid out a pretty good statistical picture of the financial situation and state of mind of Canadians. Babad’s summative statement from the data provided was, “Here’s the state of play for many Canadians: Broke, stressed, and in no mood to spend more.”

In the article he noted:

  • Consumer confidence has dropped by 5 points;
  • Household debt-to-income ratio is now at 177.1
  • 53% of Canadians are living paycheque to paycheque
  • 27% of Canadians can’t meet their basic needs
  • Almost 70% of Canadians believe they won’t have enough to retire.

Many more stats could be cited along with these, but that is a pretty sobering picture for Canadian households.  There was a hopeful note that Canadians seem to have become more focused on paying down their debt – but that is only after so many households have pushed far beyond their comfortable debt limits.

How did we get to this state? I challenge you to find any Canadian who says that they set out to live a life of financial stress and anxiety.  Who wants that? But that is the situation in which so many Canadians now find themselves. And, as mental health organizations such as CAMH will attest, prolonged periods of financial stress and anxiety can lead to mental health issues and challenges, along with impacting personal relationships, productivity in the workplace, self-respect, social interactions, propensity for gambling, and so much more.

So if nobody wants it, why is financial stress so common? There are many reasons that could be explored: the rising costs of so many things in life such as housing, education, energy, etc.; historically low-cost debt that has been an incentive to borrow to get things that are wanted but not necessarily needed; easier access to debt through rising credit card limits and mortgages on increasing housing costs; escalating peer pressure from social media and more sophisticated marketing and advertising strategies; the pressure of keeping up with a family, perhaps mythical, who appear to be on steroids re housing, car, education for their kids, latest cellphone, clothing, etc. The list could go on.

Perhaps the best way to capture recent decades for Canadians and their finances is “out of control.” By that I mean that Canadians turned their attention away from staying in control of their finances, setting their own limits, defining their own needs and wants, living within their own means, and valuing non-material things in life and became increasingly vulnerable to the financial influences and incentives swirling in the world around them.

In many ways, this is not the fault of many of the Canadians who find themselves in financial stress. The world of money and finance has become very sophisticated, complex and challenging for those who are not financially literate and confident and who were never adequately prepared for the financial decisions that they would face in life.

The majority of Canadians never received any financial education, especially for the rapidly-changing financial world that evolved around them.  Unfortunately, we live with the legacy described by the statistics shared at the outset.

We can, however, change the future – by educating our kids and preparing them for their future financial decisions and responsibilities.

Our actions in life are influenced by many factors. A significant one is our level of confidence.  Confidence can be internal, in how we feel about ourselves and our capabilities, but is expressed  externally by how we act. When it comes to financial life, most Canadians have lacked confidence, both in how they feel about their financial capability and in how they undertake their actions and decisions.

A confident person is more likely to ask questions, apply their knowledge to consideration of their decisions, recognize when they need advice from others and take steps to seek it out. They are more likely to set their own limits rather than deferring to those prescribed by others, establish their own goals based on their own needs and wants rather than be swayed by the influence of others and, perhaps most importantly, have the knowledge, skills and confidence to stay in control of their own lives.

We must do what we can to build financial confidence and competence in the adult generation of Canadians today to help them contend with, and hopefully alleviate, the situations of financial stress and over-extension in which they find themselves – to right the ship, one might say.

But the future is sitting in our classrooms today, and on the baseball diamonds, in the hockey rinks, on the dance floors, at the malls and on the couch in the basement.  We can change those futures and dramatically reduce the number of Canadians living lives of financial stress and anxiety in the future. We can increase the number living within their means and experiencing the happiness and contentment of life that can come with that.

But we have to act now and take steps to educate our kids and build their financial confidence and capability to enable them to feel confidence, act with confidence and build a successful financial future.

By Gary Rabbior
Canadian Foundation for Economic Education