Deal­ing with in­come volatil­ity

Fluc­tu­a­tions means fi­nan­cial chal­lenges for mil­lions of Cana­di­ans: Study

The Daily Observer - - BUSINESS - GARRY MARR

TORONTO — About 3.3 mil­lion Cana­di­ans say they are deal­ing with in­come volatil­ity to the ex­tent their monthly in­come can fluc­tu­ate by 25 per cent or more, ac­cord­ing to a study pub­lished Wed­nes­day.

Toronto-Do­min­ion Bank com­mis­sioned the sur­vey to look at in­come volatil­ity and how those sub­jected to it are more likely to face fi­nan­cial chal­lenges and ul­ti­mately lack con­fi­dence in their fi­nan­cial fu­ture.

“Our aim was to take an emerg­ing is­sue — in­come volatil­ity — and to shed light on how it’s af­fect­ing the day-to-day lives of Cana­di­ans,” Bharat Mas­rani, chief ex­ec­u­tive of TD, said in a state­ment. “Our find­ings sug­gest the im­pact is both per­va­sive and pro­found — mak­ing it hard for many peo­ple to live the life they want to­day, let alone plan for and feel con­fi­dent about their fu­ture. It’s a sub­ject wor­thy of closer ex­am­i­na­tion.”

The sur­vey found 37 per cent of adult Cana­di­ans — about 10 mil­lion Cana­di­ans — main­tain they ex­pe­ri­enced mod­er­ate to high lev­els of in­come volatil­ity over the past year.

The sur­vey de­fines in­come volatil­ity “as in­come which is in­con­sis­tent (not re­ceived on a reg­u­lar and pre­dictable ba­sis), un­sta­ble (amount varies each time it is re­ceived), and that fluc­tu­ates month to month by a sig­nif­i­cant per­cent­age.”

The sur­vey, which was con­ducted on­line by Ip­sos Canada from April 13-23, 2017, us­ing a rep­re­sen­ta­tive, na­tional sam­ple of 3,000 Cana­di­ans, 18 years or older.

The cred­i­bil­ity in­ter­val for this sam­ple size is plus or mi­nus two per­cent­age points, 19 times out of 20.

The study shows in­come volatil­ity is more likely to be ex­pe­ri­enced by part-time, self­em­ployed, sea­sonal work­ers and the un­em­ployed.

The top three causes of fluc­tu­a­tion in month-to-month in­come were ir­reg­u­lar hourly pay (28 per cent), mul­ti­ple sources of vari­able in­come (19 per cent) and self­em­ploy­ment (18 per cent).

“Young adult Cana­di­ans – par­tic­u­larly young women, as well as men aged 45-54 — are also more sus­cep­ti­ble, as are lower-in­come Cana­di­ans,” the bank said.

By us­ing re­ported be­hav­iours and per­cep­tion when it comes to sav­ing, spend­ing, bor­row­ing, and fi­nan­cial plan­ning the re­port at­tempts to gauge the over­all fi­nan­cial health of Cana­di­ans. In all four cat­e­gories, those with higher in­come volatil­ity show sig­nif­i­cantly lower fi­nan­cial health.

When it comes to sav­ings, the sur­vey found 44 per cent of Cana­di­ans with high lev­els of volatil­ity show low fi­nan­cial health ver­sus 28 per cent of those with low lev­els of in­come volatil­ity. As for fi­nan­cial plan­ning, Cana­di­ans with high lev­els of in­come volatil­ity are al­most twice as likely — at 34 per cent to 18 per cent — to show low fi­nan­cial health than those with low lev­els of in­come volatil­ity.

“In­come volatil­ity can erode peo­ple’s con­fi­dence in cre­at­ing a fu­ture they want for them­selves and their fam­i­lies,” said Mas­rani. “Every­one de­serves to look for­ward with a sense of cer­tainty and pur­pose. It is im­por­tant for us as in­di­vid­u­als but also, more broadly, as a coun­try.”

The sur­vey also found re­spon­dents ex­pe­ri­enc­ing mod­er­ate to high lev­els of in­come volatil­ity were more likely to de­lay buy­ing gro­ceries, pay­ing down a min­i­mum amount on a credit card or pay­ing off monthly bills. Those with high level of in­come volatil­ity are twice as likely to feel stressed about their per­sonal fi­nances as those with low amounts of in­come volatil­ity.

“This con­firms what many com­mu­nity or­ga­ni­za­tions have sus­pected for some time — that there has been a sea change in the fi­nan­cial lives of Cana­dian house­holds. Ris­ing in­come volatil­ity ap­pears to be mak­ing it far more chal­leng­ing for house­holds at all in­come lev­els to man­age fi­nan­cially, but Cana­di­ans with lower in­comes are re­ally feel­ing this most sharply,” said El­iz­a­beth Mul­hol­land, chief ex­ec­u­tive of na­tional char­ity, Pros­per Canada, which par­tic­i­pated in the re­lease. “We need to broaden our fo­cus to ad­dress, not just in­come poverty and inequal­ity, but in­come volatil­ity as well, if Cana­di­ans are to truly pros­per.”


Bharat Mas­rani, pres­i­dent and CEO of TD Bank, at­tends TD’s an­nual meet­ing in Toronto in this file photo. Toron­toDo­min­ion Bank com­mis­sioned a sur­vey to look at the in­come volatil­ity Cana­di­ans are ex­pe­ri­enc­ing.

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