Stay prepared for financial shocks, expert says

Many families may not be adequately prepared to handle unexpected financial challenges such as job loss, reduced work hours or retirement, a financial planning expert told the Sun.

Garth Duncan of World Financial Group said households should ideally have several months of savings set aside to weather unexpected disruptions to income.

“Families should have three to six months of household income saved in liquid assets to withstand emergencies such as a job loss,” Duncan said.

However, based on his experience working with clients in the region, that level of preparation is not always common.

Duncan, who works with roughly 200 clients, said he cannot speak for every household in the region, but he has noticed that many people delay planning for retirement.

“Overall, what I see with at least half of the clients I work with is that they don’t have a solid retirement plan, or they think about a retirement plan too late in life,” he said.

He said when people are asked about their retirement age, “a surprising number will say, ‘I’m going to work until I’m dead.’”

Duncan said a shift in the local labour market is also affecting newcomers.

In the past two years, he has observed that newcomers to Brandon are finding it more difficult to secure employment compared to earlier years.

Many international students who came to Canada for education are now struggling to find work after completing their studies, he said. Without employment, they may also face challenges applying for permanent residency.

Rising consumer debt and limited financial planning can make households more vulnerable to financial shocks, he said.

“In my experience, people at all levels of household income tend to live at the ceiling of what they can afford,” he said.

He added that many households do not spend enough time tracking expenses or creating a budget.

“The less time people spend organizing their finances, the more exposed they are to unwise spending, which leads to relying on high-interest borrowing.”

Duncan said he has worked with families who manage finances effectively, even on modest incomes, while some higher-income households struggle to save and invest consistently.

Mortgage renewals have been a concern for many Canadians in recent years, but Duncan said the situation has stabilized somewhat.

Mortgage rates have declined compared to previous peaks, with many homeowners now renewing at around four per cent, depending on the mortgage term and amortization period.

While some homeowners are still renewing mortgages that were previously locked in at rates near two per cent several years ago, Duncan said the jump in payments is not as dramatic as it was during earlier rate increases.

Duncan said there are several indicators that a household may be financially vulnerable to a sudden loss of income.

One common sign is when individuals are only able to make minimum payments on their credit cards, he said.

Another, he said, is reliance on payday loan companies, where interest rates can exceed 30 per cent.

“Insurance coverage is another concern, as many families lack adequate protection against major financial shocks,” he said.

He cited data suggesting only about 40 per cent of Canadians have life insurance, while fewer than 10 per cent carry critical illness insurance, leaving families vulnerable if a serious health event or death occurs.

For Westman families looking to strengthen their financial resilience, Duncan recommends three key actions.

First, he said ensuring sufficient life insurance coverage to pay off debts and replace income for at least five years in the event of a death.

Second, households should closely track their spending.

“You will be amazed at where your money is going,” Duncan said, adding that restaurants, fast food and alcohol are common areas of overspending.

“Building an emergency fund equal to at least three months of household income, which can help families manage unexpected financial setbacks without turning to high-interest debt, is important,” he said.

» aodutola@brandonsun.com

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