Do you know that every year more than 400,000 people immigrate to Canada? The number is huge, but it is true. People all over the world move to Canada for a better life and to achieve their dreams. Canada is one of the best places on the earth to live a peaceful life and that is why it attracts more people. If you are also planning to migrate to Canada or if you have already migrated to Canada but you are a newcomer, this is your newcomers’ finance guide.
This guide will help you from step 0 to score a perfect 100 about what you need to take care of before planning your move to Canada, after coming to Canada, and to live a well-settled life in Canada. Sounds exciting? Let’s get started without any further wait!
The Basic for Newcomers to Canada: Do Enough Research
Well, the first and the foremost thing you need to do for migrating to Canada is to do your research for planning everything and landing in Canada. Make a list of the research that you have to conduct. The pointers can include the following.
- Research about which province and city you would like to live your life in.
- Also, look after what are the job opportunities?
- What are the skills in demand?
- What is the cost of living?
- How is the housing of schooling?
- What is the crime rate?
Decide whether you move to Canada for study purposes or for settling down in a job. According to that, adjust your certifications, degrees, transcripts, and more. If you are moving for a job then make sure that your resume reflects that. You can also consult an agency to help you out in finding the best colleges in Canada.
Getting professional help is always a good idea especially when you are making such a big life decision. To migrate to Canada, you can opt for any immigrant services which can assist you with your travel and what to look after coming to Canada. A few of such immigrant services are Newcomer Success, Settlement.org, Next Stop Canada, Active Engagement and Integration Project, and more.
Once you have done that, search for a bank and start transferring the amount so you don’t have to go through the hassle of transferring funds and face any financial issues when in dire need. Also, gather the required travel documents so you can go through the process in one go.
Below are the few things that you will have to do after immigrating to Canada but it is always good that you do the research beforehand.
- How to apply for a Social Insurance Number (SIN)?
- Searching for a bank and opening an account
- Looking for a place
- To apply for a driving license
- Enrolling in college or school
- Searching and starting a job
It is also advised that you consult someone who has already moved to Canada to get a better sense of what else you need to do and you will also get a sense of having your back. It’s always good to have someone to help you when you are moving across oceans, right? So this research part is the base step for newcomers to Canada.
A Complete Finance Checklist for Newcomers to Canada
Now that you have set our basics right, let’s get into what all you need to do for immigrating to Canada without any hassle!
1. A Bank Account is a Must
This is an obvious thing, right? Wherever you go you will need a bank account as you can not carry cash for the rest of your life and thus you must rely on a traditional bank to serve the purpose of saving your money and disposing of you with cash whenever you need it.
Banks in Canada are similar to elsewhere in the world. Yes, there would be some differences but overall it’s the same. You can open two types of bank accounts in Canada. The first one is a savings account and the second is a chequing account.
A savings account is helpful when you just want to save your money and are not going to withdraw it frequently. You will get a good interest return on this account compared to a chequing account.
Chequing accounts help you to honor your daily transactions. It makes it easier to pay for various things such as gas, groceries, utilities, and more. You will get a debit card for your chequing account which you can use at any ATM, online sites, and point-of-sales.
To open a bank account in Canada, the following documents are needed.
- A Social Insurance Number
- Identification such as any permanent residency card or driver’s license
You can open your bank account in an online bank, trust company, any credit union, or traditional bank. There will be a specific monthly fee associated with opening a bank account which can be from $4 to $30-35 a month. You will also find accounts that charge you nothing at digital banks. It is always advisable that you search for bank accounts that provide you with a good interest rate as eventually, that will help you save more money with the impact of compounding.
If you are wondering if your money is safe in a digital bank or traditional bank in Canada, the answer is a big yes! Whether you open a savings account or chequing account, you will be insured under the Canada Deposit Insurance Corporation (CDIC) for an amount up to $100,000 per account.
2. Your Credit Score is Important
A credit score is something that will help you to build credibility to opt for financial aid such as taking a loan, taking a mortgage, or as simple as taking a credit card. It measures how creditworthy you are to the party giving you the debt of credit. As a result, it is quite crucial that you start building your credit score as soon as possible.
As newcomers to Canada, you need to know that your credit score in your home nation would not count here and thus you will have to build it from the scratch. There are various methods by which you can build a good credit score. Some of the examples are opting for a mortgage, getting a line of credit, credit cards, and personal loans.
Credit Card: Handle with Care
This is one of the easiest ways to build a credit score. Though, you need to know that you will have to be very particular about paying back the debt taken on your credit card in order to build a positive credit score. You can get a credit card from your bank or from any credit union or online bank. You may have to pay an annual fee that comes with having a credit card. It is important that you research well and do not fall into the pit of discounts or offers which may cost you more in the long run.
One drawback here is that many banks are not open to providing credit cards to newcomers in Canada. But you can go for a secured credit card in order to build your credit score.
Some of the basic tips for opting for a credit card are:
- You need to be particular about paying back the debt.
- Try to use just 70% of the credit limit.
- Never miss any payments.
- Do not opt for unnecessary credit cards.
Borrowell as well as Credit Karma provide free credit reports which can help you to know where you stand. Another alternative to get a free credit report is to directly contact any Credit Bureaus such as Equifax or TransUnion.
3. Buy a House
Once you move to Canada the main purpose is to settle down, correct? And the best way to do so is to have your own place which you can call your little nest. More than 60% of households in Canada own their place. Though it is not that easy to buy a home in Canada especially for newcomers to Canada. It takes years of savings and research to finally buy a home.
There are various things that you will have to look after to buy a house in Canada. For example, you will have to pay at least 5% of the amount as a down payment for buying a house. You may have to submit information related to your income, credit score, assets, and liabilities. You will also have to buy mortgage default insurance if you are paying less than 20% as a down payment. In addition to that, finding a good mortgage broker and getting a good mortgage deal is essential because it will be the biggest expense that you will have to incur every month in order to pay back the loan.
First, make sure that you have done your homework well or you can also consult an expert to make your house buying process smoother.
Here are a few tips for buying a house in Canada:
- Research the locality you want to live in.
- Analyze the available mortgage rates.
- Research mortgage providers and compare them to get the best deal.
- Ask for help for pre-approval of a mortgage loan.
- Save enough for a down payment.
- Save for closing costs.
Even for opting for a mortgage, you will get the option of a variable mortgage and a fixed mortgage. First, you must decide what suits your needs and your budget. Always remember to buy a house that you can afford in the long run because buying a house is not just limited to paying a down payment. If you want to learn more about buying a house in Canada refer to this guide: The Ultimate Guide on How to Buy a House in Canada.
4. Your Kid’s Education is Important
Whether you are moving to Canada, you may have to look for a school that suits your kids’ requirements. If your kids are just toddlers, you have to get them into school by the age of 5 to 6 years. After the schooling period is over, it comes the time for post-secondary education which is also known as college or university education.
Schooling and higher degrees for kids are very expensive and that is why in Canada you get the benefit of the Registered Education Savings Plan (RERP). Research well for such schemes which can aid you financially.
What is a Registered Education Savings Plan (RERP)?
Under this plan, you can save for your kids’ education starting from their birth till they turn 18. As much as you contribute, the government also contributes at 20% which is a maximum of $500 annually. So if you are contributing $3,000 every year in a RERP account, the government will contribute $500 each year.
This $500 comes under the grant called the Canada Education Savings Grant. Under this grant, your kids can get $7,200 for paying their tuition fees in the future. There are also other plans such as Additional CESG funds, Canada Learning Bonds, and Provincial Education Savings Grants.
5. Your Education is Important As Well
Whether it is about opting for a college degree or just increasing your knowledge and skills to earn more income, continuing education always yields advantages. Under the Lifelong Learning Plan (LLP) by the Canadian government, you have the opportunity to withdraw a maximum of $20,000 or if you are withdrawing with your spouse then $40,000 to fulfill your ambition of part-time or full-time education.
You will have to pay back this amount within 10 years of withdrawing it. Remember that this money goes to your education and not your kids’ education.
6. Save, Save, and Invest
Whether you live in Canada or in any other corner of the world, saving is the most crucial thing to build wealth. But as we’re talking about newcomers to Canada, let’s talk about what you can do to save and invest in Canada after landing here.
Save Money in Canada
There are various ways in which you can save money in Canada. The options range from saving your money in a savings account to saving it in an RRSP (Registered Retirement Savings Plan), GICs (Guaranteed Investment Certificates), CDs (Certificate of Deposits), stocks, bonds, and much more. Divide your goals from saving for an emergency fund, saving for a vacation or a wedding to saving for bigger goals such as retirement or buying a house.
The most important thing here for investing or saving in an instrument is that you need to research it and need to know how much return the instrument will provide you over a specific period. For example, if your goal is short-term then you can consider investing in stock because it gives good returns but if your goal is saving for retirement then I suggest you go for safe investment options such as a mixture of government bonds, stocks, and traditional instruments such as RRSP.
Investments in Canada
The Canadian government provides various investment and savings options to people in order to help them build wealth for their future. It includes a Tax-Free Savings Account known as TFSA, under which you can save money without any tax deductions. You can also save through treasury bills.
The earlier you start saving money the better it would yield because it would attract compounding interest. Though you need to know what your risk appetite is because if you have high-risk tolerance, you can easily go for the stock market by investing in Exchange Traded Funds (ETFs), mutual funds, or options and stocks. But if you want to go for safer investments with lower risk then you can go for a savings account, certificate of deposits, and other government-issued instruments.
If you find it hard to understand where you should invest, you can always consult a financial advisor. There are many Robo-advisors available in Canada which can reduce the cost of your investment advisory.
These are some of the tips to help you invest:
- Research well for the highest interest rate as per your risk appetite.
- Find instruments that attract lower investment fees.
- Always understand where you are investing your money.
- Avoid gambling.
- Trust the process and go for the long term.
- Always diversify your portfolio.
- Shuffle and analyze your portfolio every year.
- Always have enough money saved for emergencies before investing in any long-term funds.
- Utilize government plans to the maximum searches TFSA, RRSP, etc.
7. Start Your Own Business
For newcomers to Canada starting a new business is always a good idea. Yes, just as in any other country in the world, starting a business and looking after taxes, licensing, taking permits, and ensuring workplace safety and employment standards can be challenging in Canada. But once it is settled, the sky’s the limit for you!
You can also refer to the website of the Government of Canada in order to understand how you can start a business in Canada and what all you will need to plan, settle and finance your business.
Some of the common tips for starting a business in Canada are as follows:
- Answer yourself why you want to start this particular business.
- What are your long-term goals for this business?
- Do you have any investors in line?
- Where will you find investors?
- How much investment will you need and what is your current savings?
- Will you continue your current job or are you planning to just focus on the business? Do you have dependents on you? If yes then how will you manage that need?
- Are you mentally prepared for starting a business?
- Do you have any backup plans?
Also if you are not sure about starting a business you can always start it as a side hustle and once you have enough confidence you can quit your current job and focus 100% on your business to make it grow and prosper.
8. Focus on Taxes
As per a quote by Benjamin Franklin, in life, only two things are certain: Death and Taxes. You cannot avoid taxes. In Canada, you have to look after various taxes from income tax to GST or HST if you are doing a business. Good thing is that you can also get some benefits for paying taxes such as GST or HST credits, provincial rebates, Canada Child Benefits, and more.
Note that you will have to file your individual taxes by 30th April each year. If you are self-employed then the tax deadline is till the 15th of June. You can opt for an accountant or you can always use tax software available online which can be chargeable or free based on the services you opt for. Some of the examples of free taxation software are StudioTax, WealthsimpleTax, TurboTax Free, and more.
9. Scammers are Everywhere: Protect Yourself
In life, nothing comes free or easy. So if it sounds extraordinary then you must question it for credibility. Some of the common types of fraud or scams in Canada are employment scams, tech support scams, romance scams, bank investigation scams, revenue income tax scams, or even immigration scams.
Also with the internet being everywhere saving yourself from Cybercrimes is also important. You must protect your financial information and never share it with strangers.
Some of the common tips for saving yourself from such fraudsters are as follows:
- Never get into any get-rich-quick schemes.
- Make sure that your passwords are complicated and you update them on a regular basis.
- Never ever share your passwords.
- If you get any unsolicited email or link then never click on it.
- Check the Email address and website whether it is secured or not.
- Canada Revenue Agency (CRA) never accepts payment for taxes through a gift card or Bitcoin. So if you ever receive a call or email related to it, don’t trust it.
- Protect your Social Insurance Number and private information at all the cost; never share it over calls.
- If you are to give your private information to someone in a public place, make sure that you have enough privacy.
- Never ever send money to people online to find love.
Even after taking enough precautions if you fall into such a trap, make sure that you contact the concerned authority and file a police complaint. You can also contact the Canadian Anti-fraud Centre. If it is a bank-related scam, immediately freeze your bank account and cards to avoid losing money.
10. Go Long Term: Think about Your Retirement Plans
How much to save for retirement is a constant debate! Whether you want to retire at 50 or 60, it is important that you plan. In Canada, the government provides various retirement plans to help citizens save for retirement and have a happy retired life. I have listed some of the most crucial plans below for newcomers to Canada.
Canada Pension Plan (CPP)
It is a mandatory plan for citizens during their employment. The money gets deducted every year as some percentage of the salary. You can redeem this amount from the time you turn 60 or you can start receiving a pension when you turn 65. You can also postpone receiving CPP to get a higher amount at a later stage.
Old-age Security Pension (OAS)
Under this plan, you don’t have to contribute, unlike other plans. If you have lived in Canada from the time you turn 18 and if you are 65 years and older, you are eligible to receive an OAS pension. If you want to receive a full amount for this pension when you turn 65 then the requirement is that you have to live a minimum of 40 years in Canada from the time you turn 18. Based on how long you have lived in Canada, the pension that you receive varies. If you have a lower income, you can also qualify for a Guaranteed Income Supplement Plan.
Registered Retirement Savings Plan (RRSP)
This is one of the most significant plans for Canadians. Here you can invest your money without paying any taxes on the same. Though you will have to pay taxes on the amount you will receive when you withdraw the money.
Tax-free Savings Account (TFSA)
We have already talked about this instrument earlier, but let’s get into a little more detail. If you want to invest in long-term instruments as a newcomer in Canada then this is the plan for you. Here your money will be taxable when you make any payment to the account but when you withdraw it, it will be tax-free.
As a result, there is always confusion between whether you should choose an RRSP account or a TFSA account.
Newcomers to Canada: Diversify Your Investments
You can always mix and match investment instruments as per your needs. For example, you can choose to invest $1000 in a TFSA account while another $1000 in an Exchange Traded Fund. The return would be much higher than just investing in a TFSA account and the risk would reduce for investing in an ETF because you are also investing in a safe instrument. This is called diversification and it is a must if you want to save money for long-term goals and create wealth.
Conclusion for Newcomers to Canada
Newcomers in Canada, this is all that you need to know for your finances. I hope that this guide has helped you to understand what all you need to take care of when you move to Canada from your country and make it your home. Just make sure that you are well prepared mentally and financially and have the support of your family because in the end that is all that matters. Wish you all the best in starting a new journey!