Welcome to Canada!
I believe we can all agree that Canada is the best place you can find yourself on earth. This country welcomes hundreds of thousands of new immigrants every year who come from all races and climes to contribute to and become a part of everything we love as Canadians.
With that being said, starting life afresh in a foreign country is not without its challenges. Settling in can be tough! I know, because when we first arrived in Canada in 2011, there were a lot of things we had to figure out in quick order so we could settle in fast.
Looking back, I wish I had come across a newcomer checklist early on that covered all the basics regarding personal finances.
This financial checklist covers most of the financial information you need to start your new life in Canada. Read on to learn about how to open your first bank account, build credit, buy a home, save for your kids’ college education, grow your wealth and plan for retirement.
Getting Started As a Newcomer to Canada
You will have already started to research Canada before you get here. Some of the tasks you can complete before landing that will make your life a lot easier include:
Learn everything you can about the province and city where you plan to live. Find information about the job market, skills in demand, housing, cost of living, schools, and more.
Gather your educational certificates, transcripts, and degrees. Arrange for an official evaluation to get your academic credentials assessed for recognition in Canada. Ensure your resume is up-to-date.
Sign up for free immigrant services that offer free pre-arrival assistance and newcomer services, such as Next Stop Canada, Newcomer Success, Active Engagement and Integration Project, and Settlement.Org.
Open a bank account and transfer your funds if possible before your arrival. Gather all your travel documents in one place including your valid passport and visa or confirmation of permanent residence.
When you arrive in Canada, you will want to quickly apply for your Social Insurance Number (SIN) so you can start your job search, apply for a bank account (if you haven’t done so already), find accommodation, apply for a Canadian driver’s license, enroll your kids in school, and more.
As is obvious, there is a lot that needs to get done within your first few weeks of becoming a Canadian resident, some more pressing than others.
On the financial side of things, new immigrants may be faced with significantly different ways of doing things in Canada. Thankfully, you can slowly ease yourself into putting your “financial house” in order as you continue to settle down in this country.
Financial Checklist for New Immigrants in Canada
This guide covers the following topics:
- Open a Bank Account
- Build your Credit Score
- Become a Homeowner
- Plan for your Kids’ College Education
- Get an Education
- Save and Invest Smartly
- File your Taxes
- Start a Business
- Protect yourself from Fraud
- Plan for Retirement
1. Open a Bank Account
The types of bank accounts available in Canada are similar to what most of us were familiar with back home, even though the names may be spelled differently e.g. Chequing (Canada) vs. Checking or Current account. The two main types of bank accounts you will encounter are the savings and chequing accounts.
A chequing account is where you keep the money you require for day-to-day transactions. For example, to pay for groceries, transit passes, gas, phone, rent, utilities, and other bills.
Your bank will issue a debit card to accompany your chequing account and you can use this card to make payments at a point-of-sale or online and to make withdrawals at an ATM.
Chequing accounts also allow you to make payments using cheques, and it is the account where your salary is deposited.
A savings account is where you can keep funds you don’t need right away so it can earn interest. When you need money, you can easily move it into a chequing account. More on savings account later on in this article.
In order to open a bank account, you will need the following documents:
- Social Insurance Number
- 1-2 pieces of identification, such as Canadian driver’s license or permanent residency card
The financial institutions were you can open a bank account are:
- Traditional banks (Big Banks)
- Credit unions, also known as Caisse Populaire in Quebec
- Online banks (Digital banks)
- Trust companies
Generally, banks will charge you a monthly account fee on your chequing account that varies with the account package you choose. Monthly fees can vary from $4 to as high as $30!
If you are averse to paying monthly fees for a chequing account (like I am!), you should look at a digital bank like Tangerine, or your local credit union.
Many traditional banks like the Royal Bank of Canada and CIBC also offer newcomers a banking package that waives the account fees for 12 months. However, note that these newcomer packages may come with preconditions you need to meet in order to qualify for the offer. For example, you may need to make an initial deposit of $5,000 to $10,000 in your account.
Here is a list of 5 free chequing accounts in Canada. Some of them even pay you interest on your balance!
Is Your Money Safe?
Canada has a very robust and healthy banking system. Monies in your chequing and savings accounts are regarded as deposits and are insured if your bank goes bankrupt. Financial institutions may be insured federally through the Canada Deposit Insurance Corporation (CDIC) or provincially through each province’s deposit guarantee plan.
CDIC insurance coverage is up to a maximum of $100,000 per deposit category (e.g. savings, chequing, GICs), while provincial insurance varies and may guarantee up to 100% of your deposit.
- The best savings accounts in Canada
- KOHO Prepaid Visa: Getting cash back on debit purchases
- Tangerine vs. EQ Bank: Online banks in Canada
- 18 ways to save money on your banking
2. Build your Credit Score
A credit score is a three-digit number that lenders use to assess your creditworthiness (i.e. whether or not you can be trusted to pay back borrowed money).
If you decide to take a loan to buy a car or home, the bank will pull your credit report and what they see there will determine if you get a competitive borrowing rate, or whether you even get approved at all.
New Canadians want to start building their credit as soon as possible. In most cases, the credit history you have built up in your home country does not count in Canada, and unless you have the cash to pay upfront for all your purchases, you will need to work on your credit score.
A credit card is one of many ways to build a credit history. Other options include lines of credit, personal loans, mortgages, cell phone contracts, and more.
Check with your bank on how to apply for a credit card. You should do your research beforehand on the types of credit cards available. Credit cards often come with an annual fee and other usage fees that can quickly burn a hole through your pockets.
Ask your bank if they offer no-fee credit cards.
In some cases, banks are reluctant to approve your application for a credit card if you are very new to the country and have no existing credit profile. In these cases, you can opt for a secured credit card.
It is worth noting that you must use your credit card wisely. It is not free money!
- Use your card often to build your credit score.
- Always pay your bills and credit balance on time. Missed or late payments will hurt your credit score.
- Use no more than 30% of your credit limit.
- Avoid unnecessary credit applications
Read more on how to pay off credit card debt fast here.
How to get a free credit score
Newcomers to Canada no longer need to pay a fee to check their credit scores. Borrowell and Credit Karma provide you with a free credit score that is updated every month. Both services also include a free credit report.
Borrowell and Credit Karma may send you marketing emails advertising credit cards and loans. Avoid taking on loans or credit cards you do not really need. After obtaining your credit score, you can choose to unsubscribe from unwanted emails.
How to get a free credit report
You can obtain a free credit score from Borrowell and Credit Karma, or if you prefer, you can get it directly from the credit bureaus. TransUnion and Equifax are obliged to give you one copy of your credit report per year upon request.
TransUnion: Call them at 1-800-663-9980 or apply online. You can also complete this form and mail it to them.
Equifax: Call them at 1-800-465-7166 or complete this form and mail it to them.
- 8 ways to raise your credit score fast
- What information is on your credit report?
- How to dispute errors on your credit report
- How your Canadian credit score is calculated
3. Become a Homeowner
Homeownership is a significant part of the Canadian dream. As per Statistics Canada, more than 60% of households in this country own the dwelling they reside in.
Buying a home in Canada requires some preparation. If you are like the average home buyer, you will need to take out a significant mortgage loan and make a mortgage down payment. The mortgage rules keep changing so you should be aware of any new requirements.
In general, you will need to have at least a 5% down payment (the higher the better), a good credit score, proof of your income, and some funds to cover property-related closing costs. If your down payment is less than 20% of the home purchase price, you must purchase an additional mortgage default insurance.
Home prices vary widely across the country. Before you venture into buying a home, shop around for the best mortgage rates in your area.
In my experience, the best mortgage rate is rarely offered by big banks. Compare rates using online rate comparison sites or speak to an independent mortgage broker. You can compare their best rate with what your bank is offering.
Read the fine prints. Offers for the same mortgage rate may come with different terms e.g. prepayment penalties, portability, length of pre-approval, and more.
Historical data show that homeowners save money over time when they choose variable rate mortgages. That being said, you may feel more comfortable with a fixed rate mortgage in your first few years of homeownership because it is easier to budget your monthly payments.
Buy a home you can afford. This often means you should not spend all the money the bank is willing to lend you.
I have authored an exhaustive guide on how to buy a home in Canada which covers the 9-steps you need to take to make your homeownership dreams come true.
- Mortgage rates comparison: Finding the best rates
- How to use your RRSP to purchase a home
- Closing costs when buying a home
- First-time home buyers’ tax credit
- Should you get mortgage life insurance?
- Variable vs fixed rate mortgage
- 5 ways to save your home down payment
- Mortgage terms you need to know
4. Plan for your Kids’ College Education
The right of kids to education is entrenched in law in Canada. Your children must go to school starting at the age of 5 or 6 and up until age 18 i.e., they must attend grade 1-12.
After high school, they can choose to pursue post-secondary education at a university, college, or trade school. Post-secondary tuition can be extremely expensive and is why Canada has the Registered Education Savings Plan (RESP).
An RESP helps parents to save for their child’s post-secondary education. You can contribute to the account starting at birth until age 18. To encourage you to save for your kid’s, the government matches your contributions every year at 20% up to a maximum benefit of $500 per year.
What this means is that you can contribute up to $2,500 per year to your kid’s RESP account in order to receive the maximum $500 grant per year.
This grant is referred to as the Canada Education Savings Grant (CESG). Each child can receive up to a lifetime maximum of $7,200 in CESG benefits. This is free money that goes towards paying for their tuition in the future.
Depending on your household income, you may qualify for additional benefits including:
- Canada Learning Bond (CLB)
- Additional CESG funds
- Provincial Educations Savings Grants
- How to set up a TD e-Series RESP Portfolio
- What happens to an RESP if your child does not go to College?
- Understanding Educational Assistance Payments
- How to transfer your RESP between banks
5. Get an Education
Investing in yourself includes looking out for opportunities to improve your knowledge, skill set, and income-earning ability. After settling down in Canada, you may decide to go back to school.
The Lifelong Learning Plan (LLP) allows you to withdraw up to a maximum of $20,000 (or $40,000 for a couple) to pay for full- or part-time education. The funds can be used to pay for your tuition, living expenses, etc.
Note that the LLP is a totally different plan from the RESP that is meant to fund a kid’s post-secondary education. You are required to repay your LLP withdrawals within 10 years.
6. Save and Invest Smartly
The decisions you make regarding your savings and investments can determine how fast you can grow your wealth in Canada.
There are many reasons to keep some money in a savings account. It could be that you are saving towards the down payment on a home, for an emergency fund, vacation, wedding, or other goals.
Savings accounts have offered low rates for the better part of a decade (since the financial crises of 2008), however, they remain a great tool for keeping the money you need in the short term or that you can’t afford to lose.
Shop for the best rates available and be sure to understand the terms. While the current rates offered by Big Banks are less than the inflation rate (i.e. your money is earning negative returns), some Canadian digital banks and their credit union counterparts often post rates that are much better.
You can check here for the best savings account rates available in Canada (rates are frequently updated).
The government of Canada introduced a special savings account in 2009 that is known as the Tax-Free Savings Account or TFSA. You may be eligible to save up to a maximum amount in this account every year tax-free.
Click here for everything you need to know about the TFSA, including the eligibility criteria, annual contribution amounts, allowed investments, and more.
Plain-vanilla savings accounts are just one of the options available for growing your money in a low-risk environment. Others include:
- Term deposits or Guaranteed Investment Certificates (GIC)
- Treasury Bills
The power of compounding interest is often referred to as the ‘eighth wonder of the world.’ The historical rate of return from the stock (financial) markets is around 7%, and when you take higher risks, the right investment strategy can help you grow your money faster over time.
Canadians have access to an open and developed financial market where they can easily purchase stocks, bonds, Exchange-Traded Funds (ETF), mutual funds, options, and many other assets.
The most popular investment vehicles are mutual funds which you can easily purchase through your bank. if you are comfortable managing your investment portfolios, you can save a lot of money in fees when you use an online discount brokerage service to purchase investment assets directly.
A more recent option for investing using low-cost ETFs and lowering your investment fees is to use a Canadian Robo-Advisor.
Some general investing guidelines to follow:
- Minimize your investment fees. Higher fees may not correlate to higher returns.
- Invest in what you understand.
- Do not chase after returns i.e. do not gamble.
- Keep a diversified portfolio.
- Invest with a long-term mentality.
- Maximize your registered investment accounts e.g. TFSA, RRSP, and RESP.
- Audit your portfolio at least once a year.
- Never invest money you need for your day-to-day upkeep.
- Understanding Guaranteed Investment Certificates
- What are Exchange-Traded Funds?
- Wealthsimple review: A Canadian robo-advisor
- The 10 commandments of investing
- The top GIC rates in Canada
- Index funds for your portfolio
- Conservative, balanced and growth portfolios
- Investment risks you should understand
- Basic investment terms you should know
7. File your Taxes
You are required to file a tax return every year to report your worldwide income. Even if you have not earned any income, you should still file a tax return as you may qualify for government benefits such as Canada Child Benefit, GST/HST credit, and provincial benefits and credits.
The tax filing deadline for most individuals is April 30th (i.e. tax return for the last year). If you or your spouse are self-employed, you get an extension until June 15th.
There are several ways to file your taxes for free in Canada if you earn a modest income and your tax situation is not complicated. Free tax software includes:
You may also be able to walk into a free tax clinic in your area. If you do not qualify to use free tax software, paid versions are readily available.
- TurboTax Canada Review
- Best Free Tax Return software in Canada
- How to save on taxes by making RRSP contributions
8. Start a Business
Thinking about starting your own business as a newcomer and becoming an employer? Canada is the place to be.
The rules and regulations around naming and registering your business, taxes, applying for permits and licenses, employment standards, workplace safety, etc. can appear a bit tedious, however, there are lots of resources available to guide you along the way.
Check out this Government of Canada business page for an extensive list of resources that will help you with planning, financing, managing, and growing your business.
9. Protect yourself from Fraud
One rule of thumb to remember is that “if it sounds too good to be true, then it probably is.”
Canadians lost about $100 million to scams last year including to:
- Romance scams
- Canada revenue income tax scams
- Employment scams
- Advance fee fraud
- Tech support scams
- Phishing scams
- Bank investigation scams
- Immigration scams
Here are some precautions you can take to prevent fraud and to stay safe when online or offline:
- Use difficult passwords and update them regularly. Keep your passwords private.
- Recognize that the CRA will not call you to pay your taxes using Bitcoin or gift cards. Also, they will not threaten you over the phone.
- Avoid get-rich-quick schemes.
- Be careful when clicking on links in unsolicited emails. Check the email address to ensure it is legit.
- Don’t give out your social insurance number and other private information to some random stranger on the phone.
- Don’t send money to people you have never met while hoping to find love.
If you suspect you have been a victim of fraud, take action immediately such as freeze your bank account and credit profile, file a police report, and contact the Canadian Anti-Fraud Centre.
10. Plan for Retirement
How much money will you need to retire in Canada? Whether it is at 55 years, 65 years or much later, newcomers hope to be able to retire comfortably at some point in their lives.
Canada has a retirement income system that is framed around 3 main pillars.
Pillar #1: Old Age Security (OAS) Pension
This is a monthly payment made to seniors who are 65 years and older. The amount you receive is dependent on how long you have lived in Canada as an adult. No personal contribution to the plan is required.
To qualify for the full OAS pension at age 65, you must have lived in Canada for at least 40 years as an adult i.e. after your 18th birthday. For example, if you have resided in Canada for 20 years as an adult, you may qualify for 20/40th or one-half of the full benefit.
Click here for full details on the Old Age Security.
Seniors who have a low income may qualify for additional benefits under OAS referred to as the Guaranteed Income Supplement (GIS).
Pillar #2: Canada Pension Plan (CPP)
The CPP is a contributory plan which is mandatory during your working years and is deducted as a percentage of your income up to a maximum amount per year.
Seniors are eligible for a reduced pension from age 60, a full pension at age 65, and an increased pension if they postpone collection beyond age 65.
The amount of CPP benefit you will receive is dependent on how much and how many years of contributions you have made to the plan.
Pillar #3: Workplace Pensions and the Registered Retirement Savings Plan
If you have worked at a company that offered a pension plan, the funds will be available to you when you retire. Company pensions are designed as either defined benefit or defined contribution plans.
The Registered Retirement Savings Plan (RRSP) is a very important vehicle for planning your retirement savings. Every year, you receive a contribution room that is 18% of your income (up to a maximum) that you can invest tax-free.
An RRSP account can hold most investment assets. Even better, no taxes are levied on your returns until you start making withdrawals in retirement. A majority of Canadians expect to fall into a lower tax bracket at retirement which means that you could pay lower taxes on your RRSP income.
Tax-Free Savings Account (TFSA)
The TFSA is not just for saving money for short-term goals. Many newcomers will find the account suitable for long-term investing as well, particularly if they are still earning entry-level incomes and can only afford to contribute to either the RRSP or TFSA.
Check here for how to choose between a TFSA vs. RRSP account.
So, how much money will you need to retire comfortably in Canada? It depends.
You will need to estimate what your expected living expenses are going to be, how much you expect to receive in public and workplace pensions, and how much you need in your private savings and investment portfolios (TFSA, RRSP, etc.) to cover any funding shortfalls.
I have compiled some retirement income calculation scenarios here. You can also check out the retirement income calculator provided by the government. If your previous country of residence has a social security agreement with Canada, you may be able to receive your benefits here in Canada.
I recently published a 10,000+ word guide on retirement income for Canadians that pretty much covers everything you need to know about retirement planning.
- 16 RRSP and TFSA mistakes to avoid
- Financial steps to take at age 65 and 71
- OAS and CPP benefits when you live abroad
- A pre-retirement checklist for Canadians
- An overview of provincial government benefits for seniors
- What happens to an RRSP, RRIF and TFSA after death
- Strategies to minimize the OAS clawback
- RRSP rules you need to know
- Registered Retirement Income Fund (RRIF) explained
There you have it! Bookmark this post so you can come back and refresh yourself on any of these 10 financial topics that newcomers need to be aware of.
If you have any questions or feedback, leave them in the comments section below.