Saving Grace: How Financial Resilience Can Help You Prepare for the Next Economic Shock

The pandemic taught us to expect the unexpected. Financial resilience will help us ride it and other future economic shocks out. Photo: Rodney Smith/Trunk Archive

Marjorie Harris and Jack Batten always dreamed of living in France. In 1983, the two freelance writers and authors rented a rural property near Nice for a couple of months, and financed their annual winter sojourns after that through a home equity line of credit (or HELOC) on the downtown Toronto home that Harris, 84, and Batten, 90, bought for $25,000 in 1967. Now worth $2.5 to $3 million, the three-storey, semi-detached house is their nest egg, since they pay the bills with $1,500 a month they each get in Old Age Security (OAS) and Canada Pension Plan (CPP) benefits.

“We live on the equity in our house for all the extra stuff in our life,” says Harris, former gardening columnist for the Globe and Mail, a specialty plant consultant and author of the 2010 book Thrifty: Living the Frugal Lifestyle. Batten, who had “a brief and unhappy career as a lawyer,” has written 45 books and is now working on a memoir about his love for jazz.

When travel time to the French Riviera became too onerous, they rented a flat in Le Marais, in the 3rd arrondissement of Paris, known for its shops and art galleries. But, “Paris was proving to be a hell of a lot more expensive than going to the south of France, where you could find a place for $1,500 a month. Paris was, like, $1,500 a week,” says Harris, adding that they paid for it with a $300,000 reverse mortgage to help cover the higher costs, including business class plane tickets. “It’s just one of the major extravagances of life.”
Just before the pandemic hit in March 2020, Harris and Batten repaid the reverse mortgage and took out a new $600,000 HELOC, because interest rates were lower.

The couple put their trip to Paris on hold, and when their expenses dropped, they borrowed from the HELOC to enclose their front porch, adding adjustable windows, a storm door and a heater, to make it “toasty warm” for eating meals in the cooler spring and fall months.

Two years later, COVID-19 has left an indelible mark. Our social lives have been refocused on home and family — or moved online — and, when restaurants closed and flights were cancelled, the gap between wants and needs became glaringly obvious. A frugal lifestyle in their early years means Harris and Batten are able to enjoy their later years, largely financed by the equity they carefully built up in the home they’ve lived in for 55 years. They now have a network of neighbours who watch the house when they are away and bring over food if one of them is sick.

While a public health crisis of this size may have been unexpected, we should have been preparing for a future financial shock. They come around regularly — the last one was the global financial crisis of 2007-2008, which started when the U.S. housing bubble burst — and they are endemic to our capitalist system.

“The global pandemic has intensified financial challenges for many people and revealed a concerning lack of financial resilience,” the Financial Consumer Agency of Canada (FCAC) said in a July 2021 report on its new, five-year National Financial Literacy Strategy. Now that some of us have deflated our savings cushions, the FCAC said it’s time to address that vulnerability.

The agency started surveying about 1,000 Canadians every month in August 2020 about their financial well-being. The data dashboard on the FCAC website, last updated in November 2021, has some good news. More than half of households — 57 per cent — reported using a budget, compared to 52 per cent in August 2020 and 49 per cent in the FCAC’s 2019 Canadian Financial Capability Survey; 46 per cent described themselves as financially savvy, up from 40 per cent in 2019.

In less encouraging news, 50 per cent of households reported a work-related financial impact from COVID-19, while 39 per cent said they used their savings to cope.

Meanwhile, the percentage of Canadians who reported spending more than their monthly income increased from 19 per cent in 2019 to 29 per cent by November 2021.

Much was made of the drop in household spending during the pandemic, when no one could dine out or go to a concert, and Canadians managed to save an unprecedented $180 billion — roughly $5,800 per Canadian — according to a March 2021 speech by Bank of Canada Deputy Governor Lawrence Schembri. While jobs were lost, government assistance like CERB managed to keep people afloat, and enforced saving meant household income increased, mainly for high-income earners. The bank’s Canadian Survey of Consumer Expectations backed this up, showing that 47 per cent of households that earned more than $100,000 saved more than usual, while only 20 per cent of those making less than $40,000 were able to do the same.

Most of that savings was sitting in bank accounts by March 2021, while data from the credit score company Equifax shows many Canadians — in all age groups — managed to pay down credit card debt. However, by November 2021, as Christmas approached and Omicron hadn’t hit yet, Equifax reported Canadians had turned on the spending taps, “mostly driven by younger consumers under the age of 35.”

Kelley Keehn, 46, a personal finance educator and author who splits her time between Edmonton and Toronto, says a scarcity mindset can lead to what she calls revenge spending. “It’s like being on a restricted diet you didn’t agree to and now all the food is there and you can’t contain yourself,” she explains. “We say that we’ll choose the fruit over the chocolate, but when we’re stressed, when there’s a number of things put in our path, it shows time and time again that we choose the chocolate.”

As the federal government noted in its 2021 budget speech, younger generations were hardest hit by the pandemic, since many worked in high-contact jobs, like the service industry. Those who managed to hang on to their positions worried that they would lose them in subsequent waves.

And an online survey of 763 Canadians aged 18 to 25 by the Canadian Bankers Association in June 2021 showed Gen Z wrestling with financial instability, with 51 per cent reporting they experienced anxiety related to debt during the pandemic and 52 per cent saying they would have been in trouble without government benefits, which 64 per cent received. Their average debt load was $14,100, with 39 per cent reporting student loans and 49 per cent carrying credit card debt.

The association noted this generation “is keen to save” and the majority of respondents reported tracking their spending and using budgets. Their reasons for saving? For emergencies and financial independence, with most of it going to TFSAs (47 per cent), high-interest savings accounts (27 per cent) and RRSPs (20 per cent).

This is good news for parents, because Gen Z is likely relying on the bank of mom and dad to help finance their education, bail them out when they’re short on rent or even help with the down payment on their first property. The reason older adults can do this is because they’ve had more opportunities to develop financial resources, according to a September report on Canadians’ financial resilience and well-being during COVID-19 by Statistics Canada and Seymour Consulting Inc. It notes retirees also benefit from regular government support through programs such as OAS, CPP and the Guaranteed Income Supplement (GIS).

Harris and Batten always had a plan for their money, despite their variable incomes as freelance writers, and it paid off. They agreed to build financial resilience by buying a worn-down house in an older area that was about to gentrify, borrowing against the home’s rising equity to fix it up and increase its value, and then borrowing again from the home’s equity to buy the things they had denied themselves earlier in life.“I bought the first really effective winter coat I’ve ever had in my life,” Harris says of her late-2021 purchase. “I spent a fortune on it and paid almost $1,000.”

She sets out her motto in Thrifty — “never, ever borrow more than you can pay back” — and learned to be frugal growing up in a household where money was scarce. Then her father, a minister for the Royal Canadian Air Force, died in a plane crash 18 months after her mother passed away. Just 17, she learned that he had a no-flying clause in his life insurance. The CAF gave him a bang-up funeral, handed her the two weeks’ pay he was owed and said, “No widow, no pension.”

In her early 20s, her first marriage broke up and “I realized I was going to have to pay my own way, and learned never to count on anyone else for survival,” she writes in her book. She went on a wild, credit-card spending spree when she and Batten, whom she married in 1967, hit a rough patch, a debt that took a couple of years to pay off and “a huge amount of discipline to retrieve my old frugal ways.” Long since reconciled with Batten, “we’ve kept this old house going and have had a wonderful life.”

They have proved you can count pennies and still have nice things, particularly when it comes to clothes. Batten, a sharp dresser, was buying second-hand more than a decade ago, and sometimes buys women’s shoes. It’s remarkable that, in his 70s, Batten beat the cool kids to thrift stores and embraced both sustainability and gender fluidity before singer Harry Styles started wearing faux-fur boas.

In an essay he wrote for Thrifty about his buying secrets, he revealed he paid just $14 for a much-coveted Harris tweed jacket at Value Village, a second-hand store. As for shoes, he admitted to buying them on sale in women’s shoe stores. His feet are small, a size seven at most, and women’s shoes fit him perfectly.

“It takes someone with a very keen eye for shoes, almost always a woman, to spot my bisexual footwear,” he wrote. “Not that I feel uneasy about getting outed. Besides, two factors balance out any possible embarrassment: one is that women’s shoes — flats, of course — offer more variety in design; and, second, for some reason unfathomable to me, the discount at women’s shoe sales is much larger than at men’s shoe sales. And saving money, after all, is what the exercise is all about.”

Harris wrote Thrifty after her friend Margaret Atwood published Payback: Debt and the Shadow Side of Wealth in 2007, and suggested to her publisher that Harris should write about the flip side of the coin. “You have to interview me,” Atwood said, bringing out a big ledger from the 1930s, a daily record of every penny her mother spent. “This extraordinary document … reinforced my own feeling that knowing exactly where you are at any moment financially is a healthy way to be,” Harris wrote.

Twelve years later, they’re still saving. They live on 80 per cent of their combined CPP and OAS benefits, give away 10 per cent and stash away the other 10 per cent.

I ask Harris how her four children and three adult grandchildren feel about the debt that encumbers the Toronto property they might inherit tax-free one day.
“We discussed it all at a family meeting,” Harris replies. “Our kids said they don’t care and never expected to get anything from us anyway. … For the first time, we’re not worried about money.”

For Keehn, financial resilience means being able to sleep at night. She manages the finances for her business and her household, which also consists of Wyatt Cavanaugh, her husband of 20 years. A creative producer for a media company, he supports her career and wants her to take charge of the money, but she struggles to keep him involved. “Super smart man, but he’s like, ‘You just do it.’ I literally have to hold money meetings with him to say here’s what I have, here’s where I have it. Here’s my stuff that doesn’t even come in. So if I pass away, you wouldn’t see a statement for it, unless you had the login to my email. I need you to know I have these assets.” Her message to others: Talk to your family members. If you’re the breadwinner, you want them to have some understanding of your financial situation so they know where the money is and what it is doing for you.

As for Harris and Batten, they plan to make one more big trip to Paris and spend the rest of their lives travelling Canada to see family. “Knowing what I know now,” says Harris, “I would advise any young person to live on about 80 per cent of what you make. … Go through all your parents’ and grandparents’ stuff, learn to trade and repurpose the masses of clothes you’ve acquired.”
Being thrifty means reusing, repairing and recycling rather than throwing out old things and making new purchases. This has increased in urgency because of the climate crisis. “Never make a move without considering the consequences: Even eyelid glitter ends up in the ocean,” she says. “Think first of all and hardest about the planet.”

Whether saving is enforced by circumstance or a conscious decision, it is central to financial resiliency, which is the ability to roll with the punches and carry on, despite setbacks. Although we’re all tired of the pandemic, hopefully it will ingrain new spending and saving habits. With any luck, financial resilience won’t be a new catchphrase, but the foundation for a new era of money management.

A version this article appeared in the Feb/March 2022 issue with the headline “Saving Grace,” p. 37.