Willful: Financial stress is leading to a lack of estate planning

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By Audrey Pridham

Nearly half of Canadians say they’re in worse financial shape than they were at the beginning of this year and more than a third say they need an extra $1,000 in monthly income to cover their day-to-day expenses, according to a study by online will service Willful.

Inflation pressures have 86 per cent concerned about its impact on their financial goals, and 39 per cent are also “pressing pause” on saving up for future goals.

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“We’re feeling the crunch from rising interest rates and inflation, even though those things have started to ease a little bit in the latter half of the year,” said Erin Bury, chief executive of Willful.

On average, Canadians say they need another $885 in monthly income to achieve their financial goals, but 37 per cent said they require $1,000 or more per month.

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As a result, 48 per cent of Canadians have had to access their savings accounts to cover day-to-day expenses during the past year, according to Willful’s most recent survey on the impact of rising costs and interest rates.

Nearly two-thirds of those surveyed hold a tax-free savings account (TFSA) and/or registered retirement savings plan (RRSP), while a third hold non-registered savings.

Many people are also delaying financial tasks such as paying off debt or getting a will. Bury said this could lead to missed opportunities to capitalize on compound interest over time and government matching programs for some savings accounts.

“Dipping into savings not only takes away the power of that compound interest, but it means that your future fund is shrinking instead of growing and going in kind of the wrong direction,” she said.

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Parents with young children have significantly been hit the hardest, with 52 per cent saying their financial situation is worse now that it was in January, compared to 42 per cent of the general population.

The survey also said 83 per cent of parents have delayed financial to-dos. Bury said this can become more difficult when parents face additional costs such as child-care programs, extracurricular activities and social events.

Furthermore, many Canadians don’t have a will, life insurance or power of attorney documents, but it often depends on how old they are. For example, 72 per cent of those 55 or older have a will established, compared to only seven per cent of those between the ages of 18 and 34.

“There’s also a huge risk that us and our families will go through an emergency or the loss of a loved one, and there’s financial risk there because we don’t have these policies and documents in place,” Bury added.

Bury said Canadians are currently in the middle of the largest generational wealth transfer in history, and many still need to be better educated about setting up wills and life insurance, especially since the cost, convenience and accessibility of estate planning can often be intimidating and overwhelming.

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“We as a society do not talk about money, death, or end-of-life planning at the dinner table, and we’ve seen the new financial literacy education in Ontario start to tackle that,” she said. “But after working with thousands of customers over the last seven years, Canadians do pretty much anything they can to avoid thinking about their own mortality.”

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