Translating data-driven insights into tools and practices Canadians can use to improve their financial resilience, reduce financial stress, and support better financial decision-making.
The lab’s goal is to develop quantitative finance and data analytics solutions that will enable Canadian households to enhance their financial resilience. The Lab resides in Western University’s Faculty of Science, leveraging strengths in actuarial science, financial modelling and data science. Academic partners from the Ivey Business School, Wilfrid Laurier University, UBC Okanagan and the University of Winnipeg are also part of the team. The academic team is joined by four industry partners - the National Payroll Institute, Aligned Capital Partners, Ceridian and LifeWorks – who are providing the lab with anonymized data on the financial circumstances of thousands of Canadians showing how much they spend, save and earn.
“This collaboration allows our team of experts to analyze very complicated data sets and gain insights on how Canadians can become more financially resilient. Most financial research is theoretical, propriety or originates outside of Canada. The real-word data our partners are providing brings a Canadian context, reflecting the impact of uniquely Canadian programs and realities.”
- Matt Davison, principal investigator on the project and dean of Western Science
Our primary research questions:
Financial wellness is a complex puzzle with a myriad of intertwined subtleties, each leading to more questions. But we are going to start with;
- Savings Patterns: An examination of the savings patterns of Canadians and how these patterns contribute to financial resiliency. We will focus on the sequential patterns of savings using real world observations and in the context of realities such as low interest rates, volatile markets and unexpected shocks.
- Income Resiliency: An examination of how household income contributes to financial resiliency and in particular how the characteristics of income (level, interruption, sustainability etc.) empirically impact household behaviours with respect to savings patterns, investment trades, risk and return. Income resiliency has a direct impact on savings patterns but it also dictates other cash flow issues. Financial resiliency is compromised when the timing of cash inflows does not match cash outflows and inadequate financial buffers are in place.
- Investment Risk: We will examine the three cornerstones of personal financial risk – capacity, tolerance and required to assess empirically how Canadians approach risk and whether their choices contribute or detract from resiliency.
- Protection and Security: An examination of how participation in employer sponsored benefits programs contributes to financial resiliency. Employee benefits plans can cost employers and employees together the equivalent of 30% to 40% of cash compensation. Participation and utilization of these plans have a material impact on financial resiliency and we will look at how benefits plans contribute to savings outcomes, the perception of risk and income resiliency.
Defining Financial Wellness
It’s not clear when the term ‘financial wellness’ came into vogue but interest in the topic has tripled since 2014. Prior to 2012, there were minimal references to the term in the press although it was preceded by numerous investigations into financial literacy.
Noteworthy Definitions
Kempson: “ … the extent to which you can comfortably meet all of your current financial commitments and needs while also having the financial resilience to continue doing so in the future.”
Consumer Financial Protection Bureau (CFPB): “Financial Wellness is a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future and is able to make choices that allow them to enjoy life.”
Financial Consumer Agency of Canada (FCAC): “Financial well-being is the extent to which you can comfortably meet all of your current financial commitments and needs while also having the financial resilience to continue doing so in the future. But it is not only about income. It is also about having control over your finances, being able to absorb a financial setback, being on track to meet your financial goals, and—perhaps most of all—having the financial freedom to make choices that allow you to enjoy life.”
