Bringing data science to personal finance

Funded by the Canadian Payroll Association, the newly created Financial Wellness Lab at Western aims to translate data-driven insights into tools Canadians can use to improve their financial resilience

Illustration by Rob Potter / Western Communications

FINANCIAL STRESS CAN affect anyone – young and old, married and single, rich or poor. And when it does, its impacts can overwhelm us at home and at work. Lost productivity due to employees worrying about personal finances is estimated to cost Canadian employers over $20 billion each year. 

How can Canadians become more financially resilient? 

Thanks to a $750,000 gift from the Canadian Payroll Association (CPA), a team of Western researchers is preparing to find out. They aim to translate data-driven insights into tools and practices Canadians can use to improve their financial resilience, reduce financial stress, and support better financial decision making. 

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The CPA is one of four corporate partners joining Western to create the Canadian Financial Wellness Lab. The lab resides in Western’s Faculty of Science, leveraging strengths in actuarial science, financial modelling and data science. Academic partners from Wilfrid Laurier University and the University of Winnipeg are also part of the team.  

“This gift brings skill sets in these three core areas to bear on a problem of crucial importance to Canadians,” says Matt Davison, dean of science and principal investigator on the project. “Western is grateful for Canadian Payroll Association’s support in allowing a team of experts to analyze very complicated data sets to gain insights on how Canadians can become more financially resilient.”

The Canadian Payroll Association and three other industry partners – Aligned Capital Partners, Ceridian and Morneau Shepell – are providing the lab with anonymized data on the financial circumstances of thousands of Canadians showing how much they spend, save and earn. The research team, funded by the CPA’s gift, will use advanced analytic tools to identify patterns and trends.  

Chuck Grace, an instructor with the Ivey Business School, is the financial wellness lab manager. With more than 25 years working in the private sector for insurance and wealth management firms, he’s excited by the prospect of seeing empirical evidence “moving from the chalk boards to the floorboards.” 

“Most financial research is theoretical, propriety or originates outside of Canada,” Grace says. “The real-world data our partners are providing brings a Canadian context, reflecting the impact of uniquely Canadian programs like registered education savings plans, tax-free savings accounts and the Canada Pension Plan.” 

That information along with factors such as whether an individual has a mortgage, or a family, will also be analyzed to create tools to help Canadians optimize and customize their financial decisions.  

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Those choices are important given the times, and of great interest to the Canadian Payroll Association.

“Canada’s 77,000 payroll professionals are integral to the financial wellness of workers from coast to coast. To effectively manage their financial obligations, workers rely on payroll to be paid accurately and on time, every time,” says Peter Tzanetakis, president of the Canadian Payroll Association. “That’s why, for over a decade, the Canadian Payroll Association has shared research focused on the financial stress that so many Canadians experience as a result of living paycheque-to-paycheque. Supporting the establishment of the Financial Wellness Lab is a natural evolution of that research.”

The organization is sharing more than 40,000 responses to surveys they’ve conducted over the past decade, gauging Canadians’ financial wellness.

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Sophisticated analytics of the responses show Canadians fall into three categories around their money: comfortable, coping or distressed.  

“The old approaches to how we manage savings and debt don’t always apply anymore,” Grace says. “For example, we often assume baby boom retirees and people with large incomes would always fall into the comfortable group, and that is just not true. 

“We have household debt levels going through the roof, our economy is transitioning from old industries to the green or gig economies, markets are volatile and interest rates are at historic lows,” Grace continues. “It’s not entirely clear anymore what Canadian households have to do, to be financially healthy, and prepared for the shocks that come along, whether it’s a $2,000 car repair or a global pandemic.” 

Findings from the project may be tested as early as next year. Grace is hopeful solutions will increase financial wellness, while easing the emotional distress of family units across Canada.

“Ultimately, we want to provide tools that may be embedded in employee facing platforms where Canadians can go online and receive information and answers to questions when and where it is best for them,” Grace says. Story by Keri Ferguson, courtesy of Western University