Shame and embarrassment may impede some Canadians from learning more about their investments, but financial advisors, schools, parents and even companies can help turn around these feelings by encouraging Canadians to talk about their issues openly and in a non-judgmental fashion, experts say.
A recent Manulife study found that many Canadians find talking about finances more personal than talking about sex and are so overwrought about their situation that it can lead to physical and mental health issues that both reduce the quality of their lives as well as productivity at work.
Culturally and traditionally, people are not comfortable talking about their finances, regardless of their income level, said Lisa Callaghan, Manulife vice president of group benefits in Waterloo, Ontario.
“We talk about money from a very positive perspective but we haven’t addressed the fact that there is stigma in our culture around finance,” said Callaghan.
Professional counsellors who reacted to the study said people need to know that they are not alone in how they feel about financial issues and require a safe environment where they can talk openly and not be judged, she said.
“It did surprise us how strongly people felt around the shame and embarrassment they carry when it came to their financial issues,” said Callaghan.
About three-quarters of the professional counsellors said they feel that personal finances have a big impact on both emotional and mental health. But at the same time, only one in three of the counsellors saw people making the connection between their finances and other life problems, according to the study.
For her part, Susan St. Amand, president of Ottawa-based Sirius Financial Services, said many new clients come to her without little financial or investment knowledge, confidence or sophistication and feel intimidated when they speak to an expert.
Part of that has to do with the fact that the world of finance and money has become much more complicated than a few decades ago when “saving for the future” often meant a simple chequing and savings account with the odd GIC tossed in.
Nowadays, there are a lot more choices, making investing even more difficult. “But nobody wants anybody to think that they can’t figure out for themselves what’s best for them,” said St. Amand. “Many people own TFSAs and RRSPs but have no idea what kind of assets they hold inside of them.”
That means, said St. Amand, that the role of a financial advisor is even more crucial: to disseminate knowledge and information to empower clients so they can make a knowledgeable and informed choice.
People do open up almost immediately to Avraham Byers, a Toronto-based financial coach, but that wasn’t the case when he was a financial advisor. Now issues that had not been mentioned previously, like large credit card debt, rise up as a matter of course, he said.
“I realized that people had a huge need for people to have an outlet where they can open up and talk about their debt and how to conquer it,” said Byers.
According to Equifax Canada, Canadian consumer debt levels have continued to rise with Canadians owing more than $1.82 trillion as of the fourth quarter of 2017, including mortgages. That compares to almost $1.72 trillion a year earlier.
People who come to Byers aren’t those who are living way beyond their means, he said. Instead, they are those who are just trying to live the middle-class dream. “They were told: ‘work hard and you’ll be able to have this and that.’ And they’re trying to work hard – they’re not travelling on a Lear jet eating caviar’ – in fact, many haven’t been on vacation in a long time. What’s causing this are increasing expenses in many Canadian major cities. They outstrip wages.”
People who are in their 50s and are in debt are suddenly realizing that retirement is not as far off as they had first thought. Having debt at the same time as a shortened retirement is “a cocktail for a tremendous amount of stress,” said Byers.
St. Amand said she imparts knowledge to clients by asking questions and finding resources for them to read. Her company in particular has educational material for families who have intergenerational wealth.
Telling stories is a good way to reach clients because they can identify with the people in the story, she added.
Families should also be encouraged to talk about finances, including the emotional side of money and money issues, said Callaghan.
While many adults would balk at the idea of telling their children that they are behind on a mortgage payment, they can show by example different ways of being frugal rather than being frivolous with their earnings, said St. Amand.
Teaching financial literacy in schools can also be helpful. But Byers said those who learn how best to handle their finances through a textbook need to take action. For some, that can mean a big change in their behaviour. Specifically, many have a fear of “messing up” and that can mean a big hurdle they have to cross, he said.
“Literacy is step #1. It has to happen. If you don’t know what you should do then you will never do it – you just don’t know. But once you figure out what to do then you have to follow through.”
Beyond basic literacy is the importance of talking about how to change behaviours in general. “Financial literacy is not just about how to balance a budget or a chequebook, but how you change your behaviour. That’s important,” said Byers.
The workplace can also step in and help out with teaching employees about good financial habits, said Callaghan. With a large proportion of Canadians coming into work with financial stress, companies need to create an environment where people can have an honest conversation through group learning. Many companies find it helpful to bring in advisors to talk to employees in a group setting.
This will help boost investors’ self-confidence when it comes to money and perhaps change their judgments about others, said St. Amand. Many people think that the “family next door” is more financially comfortable than they are because they own a bigger home and have two luxury vehicles, not knowing that in reality, they may have severe debt problems, she said.
“The next step is that we continue to bring the findings forward, continue to have a conversation around the shame and embarrassment many people feel around financial issues,” said Callaghan.
There is also a lot of pressure on people these days to use their financial knowledge quickly and efficiently, said St. Amand.
She said she knows of a number of young people who are buying homes and instantly becoming landlords when they have no idea of what it’s like to be a landlord and working at the same time.
Parents are often under pressure to pay for sports activities, perhaps private schools and summer camps and even the odd vacation to Disneyland when they don’t have the money. How this affects people in the long term is something that people need to understand, said St. Amand.
“Sometimes choices have to be made and it’s difficult to make choices.”