Economic fear is making Canadians less productive at work and impacting their investment choices

A women walks past office lease signs in downtown Hamilton, Ont. on March 18, 2021. Nathan Denette/The Canadian Press.

At A Glance

  • 10 percent more Canadians are uncomfortable with their finances than last year.
  • Financial advisers are encouraging Canadians to pay off as much debt as possible.
  • Barely half of Canadians are content with the status of their retirement savings.

New headlines about a looming recession have been released every morning for weeks, so how are Canadians reacting to them? 

According to a press release from the National Payroll Institute (NPI), a nationwide employers association, Canadians are worrying so much on the clock that it’s even costing money for those they work for. 

An NPI survey found 72 percent of working Canadians spend part of the workday dealing with, or thinking, about their personal finances, with 1 in 5 aware their workplace performance is being affected. 

“It’s convenient to frame employee financial health as an individual problem, but the reality is that it has big implications on businesses,” said NPI president Peter Tzanetakis. “Beyond lost productivity and decreased engagement, our past research has also shown that financial stress leads to increased absenteeism, decreased employee motivation, strained relationships with colleagues, and turnover.” 

On Nov. 8, the Financial Post reported that 70 percent of Canadians are pessimistic about the state of the economy, with those aged 18-34 feeling the most worried 

The NPI study found that 10 percent more Canadians were uncomfortable with their finances compared to 2021, and employees worrying about their finances while working will ultimately cost their employers $40 billion in lost productivity in 2022. This figure is up from what the NPI estimated to be $26.9 billion lost for the same reason in 2021. 

“On average, a financially stressed worker spends nearly 30 minutes every day dealing with their financial situation, and not on business tasks at hand,” said Tzanetakis in a press release. “Over the year, that’s over three weeks of lost productivity per employee.”

Canadian banks are reporting that client behaviour matches that of a population worrying about the probability of an economic downturn.  

“There’s no escaping that we’re in a unique market environment and this has understandably created some anxiety amongst many investors,” says Michael Williams, the director of portfolio advice at the Royal Bank of Canada’s (RBC) InvestEase, the bank’s online investment management business. 

Williams says clients are being advised to pay off expensive existing debts, like high interest credit cards, and put together an emergency savings fund if possible. He also says it is a good time to take advantage of unused contribution room in Tax-Free Savings Account (TFSA) and Registered Retirement Savings Plans (RRSP). 

A Scotiabank spokesperson said more customers are requesting unsecured restructuring of their portfolios, such as transferring their credit cards to unsecured lines of credit to pay down their balances faster and at lower rates. 

“When it comes to investments, customers have questions about their mutual fund portfolios, and what will happen in this current state of mutual fund volatility should their mutual funds decrease,” said the spokesperson. 

According to the spokesperson, many clients uncomfortable with the market are being advised to move their mutual funds to more secure Guaranteed Investment Certificates (GICs), effectively investments with more assured, but also lower, returns. 

The spokesperson said Scotiabank surveys revealed that Canadians are spending an average of over 14.3 hours per week worrying about their finances. 

Annaliz Martinez, National Director Advisor Enablement at RBC says clients have been steadily contacting their advisors at the bank, especially those over 55. 

Martinez says more RBC clients are contacting the bank to update their financial plans to ensure they stay on track with their goals, especially those nearing retirement. 

According to a Canadian Imperial Bank of Commerce (CIBC) survey in March, barely half of Canadians felt comfortable with their retirement savings. However, Martinez says RBC clients are not panicking just yet, and for the moment, are refraining from any drastic moves. 

“Regarding investments, most clients are staying the course as they wait for inflation and economic challenges to pass,” says Martinez. “As time goes by, more clients are becoming confident that this economic situation will pass,”. 

Williams says that if clients can stick to their investments, and keep steadily contributing to them, they can take advantage of lower prices on the market during the economic uncertainty. 

Whether Canadians take that advantage or not, the flow of money in one part of the economy usually impacts the whole of it in some way. According to the NPI’s survey, worrying about money can have the same effect. 

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