Calgary and Edmonton top the Canadian ‘financial health’ index, according to a new report called Urban Spotlight: Neighbourhood Financial Health Index findings for Canada's cities.
Overall, western cities have above-average levels of financial health, while cities in Quebec such as Saguenay, Sherbrooke and Trois Rivières and the Maritimes tend to score below the average.
Financial health is defined in the report as the “ability of individuals and families to balance their spending and saving to advance their financial goals, use credit prudently and productively when needed and build savings and assets for their future.
Prosper Canada and the Canadian Council on Social Development used a new composite index of household financial health at the neighbourhood level, the Neighbourhood Financial Health Index (NFHI), to examine the financial health and vulnerability of Canadian households across the country’s 35 largest cities.
"Our financial health is heavily influenced by where we live," said Elizabeth Mulholland, CEO of Prosper Canada in the press release.
"Assets and debt, not just incomes, matter when it comes to our overall financial health."
The report indicated that St. John’s, Barrie, Oshawa, Regina, and AbbotsfordMission are cities with good average income, but high debt and low savings. They may be ok financially for now but can be characterized as “living on the edge” because they are highly vulnerable to future interest rate increases and economic downturns.
St. John’s is the only city that performs better than average with respect to income and poverty levels, but also has below-average wealth and above-average debt. This combination leaves households vulnerable to higher interest rates and economic shocks.
Select Quebec cities, as well as Halifax, Peterborough, Thunder Bay, and Windsor, could be characterized as "living challenged," with below-average income, wealth, and debt and higher poverty.
Moncton, Saint John, Belleville, Brantford, and St. Catherine's-Niagara could be described as "living constrained," displaying a similar pattern but with lower than average poverty levels.
Toronto, Vancouver, Calgary, Kelowna, and Guelph could be characterized as "living large" with high income and high wealth but also high debt. Toronto and Vancouver are the most extreme examples, due largely to their elevated real estate and mortgage levels.
Victoria is the only city that performs better than average on all NFHI indicators but one – mortgage debt levels.
“Financial health is not exclusively a question of income,” the report said.
Aided by record-low interest rates, growth in household debt – 8% of indebted Canadians carry 20% of all household debt – has outpaced income growth for many years.
The report also found 19% of Canadians cannot manage a $2,000 emergency expense within 30 days and 41% of Canadians live paycheque to paycheque.
These findings “provide important insight into Canadians' financial health,” said Lucy Becker, IIROC vice-president of public affairs and member education services in the press release.
This is “of great value to regulators, policymakers and those working with Canadians to help them make investment decisions."