The costs of coming to Canada – money management tips for new Canadians
Every year about 250,000 newcomers arrive in Canada to start a new life (Source: Citizenship and Immigration Canada). Adapting to Canadian society can be very exciting and challenging at the same time – many new immigrants face barriers in finding employment in their fields and positions that pay high wages (Source: Stats Canada 2011). Because of these barriers, research the policies and limitations regarding work, student and residency permits and visas, before you immigrate. If you are a new to the country, here are 5 tips to help you and your family build and manage your finances as you start your new life in Canada.
1. Cover off immigration costs
Plan for the costs of immigrating to Canada before you arrive and after you land. These costs will likely include government fees and private services such as consulting with an immigration lawyer. In some cases, like certain permanent residency applications, you might also have to show a “proof of funds” – evidence that you have savings to live off of while in Canada. Planning for these expenses will help you and your family better manage your finances.
Before working with an immigration consultant, research them first. Some con artists pose as consultants in order to get your money. Learn about how to avoid being a victim of immigration-related fraud.
2. Plan for a possible decrease in income
Once you’ve immigrated to Canada, you may not find a job in your chosen field immediately. Or you may find your income reduced temporarily. Consider how this will impact your household finances. You may need to trim your budget or combine part-time positions to earn the income you need.
3. Look into your banking options
Most employers in Canada use a direct depositDirect deposit A way to have money from your pay, investments or the government put into your account without a cheque. Example: You can ask the Canada Revenue Agency to deposit your tax refund directly into your bank account rather than mailing you a cheque.+ read full definition method of payment, which means you’ll need to have a Canadian bank accountAccount An agreement you make with a financial institution to handle your money. You can set up an account for depositing and withdrawing, earning interest, borrowing, investing, etc.+ read full definition. When opening a bank account, think about the specific kinds of financial services you’ll need: Would you benefitBenefit Money, goods, or services that you get from your workplace or from a government program such as the Canada Pension Plan.+ read full definition more from a chequing or savings accountSavings account A bank account intended for depositing funds. Pays interest and lets you withdraw cash at any time.+ read full definition, or both? To open a bank account(s), you’ll have to provide personal information, such as a Social Insurance Number (SIN) and two pieces of acceptable identification. Apply for these documents in advance. Look for a local bank branch that offers services in your preferred language. Many Canadian financial services organizations offer specific services and banking packages for newcomers – compare your optionsOptions An investment that gives you the right to buy or sell it at a set price by a set date. The buy right is termed a “call” option, and the sell right is termed a “put” option. You buy options on a stock exchange.+ read full definition before you choose.
4. Establish your credit
To borrow money in Canada, such as a mortgageMortgage A loan that you get to pay for a home or other property. Often the loan is for 20 years or more. You make a set number of payments for a set amount each year.+ read full definition for a home, a car loanLoan An agreement to borrow money for a set period of time. You agree to pay back the full amount, plus interest, by a set date.+ read full definition, or a credit card, you need to show that you’re likely to pay the money back. Businesses look at your credit score – based on how much money you borrow, and how quickly you pay it back – to decide how much, if any, money they’re willing to lend you. Many newcomers have to establish and build credit as their financial histories aren’t necessarily carried over from their home countries. How do you build credit? Start by paying your utility and phone bills in full before they are due. When you set up your bank account, look into getting a credit card with a small limit, even if you have to prepay it. Make purchases you can afford, and pay off the card in full when it is due. These transactions are tracked and considered in your credit score. Learn more about credit scores and your credit report.
5. Make a financial plan
A financial plan looks at where you are today and where you want to go. It states your financial goals and sets out how you can reach them. How you plan depends on your knowledge and experience. Set some short-termTerm The period of time that a contract covers. Also, the period of time that an investment pays a set rate of interest.+ read full definition and long-term goals and priorities and get the knowledge you need to make good money decisions to make the most of your first years in Canada. You may want to find a financial advisor who can guide you in managing your finances. Consider which type of advisor is best for you at this stage of integrating into your new life.
- Cover off immigration costs
- Plan for a possible decrease in income
- Look into your banking options
- Build your credit score
- Make a financial planFinancial plan Your financial plan should cover every aspect of your finances: saving and investing, paying down debt, insurance, taxes, retirement planning and estate planning.+ read full definition