Moving to Canada is a massive step, if you’ve got this far we are happy to tell you that the hard part is over. You have arrived in a country that is perfectly suited to give you a better life. Most importantly though, you aren’t alone and hundreds of thousands of immigrants have made this journey before you.
Because of this long history of immigration, the banking, finance, and money systems of Canada have been figured out and catalogued by your fellow newcomers.
While it might seem overwhelming to land in a new country (and believe me, I had some tough, confusing days) if you sticks to these five money tips you won’t go wrong.
We sat down with our contributors and figured out what things you need to do in order to set up a new life in Canada and thrive. I wish I had these tips before I arrived, but now you will, and that’s just as good!
How to Figure Out Cost of Living
If you made it to Canada you’ve probably already created a plan about where to settle down. Maybe it is the city you land in, maybe it is a small farm on the prairies. Either way 99% of immigrants to Canada have done a lot of research before their visa is stamped.
I know dozens of people who had their entire Canadian life planned out about 5 months before their visa arrived, I’m one of them.
While it is important to understand the job market, climate, housing situation, and healthcare/schools, the most important thing to understand is cost of living.
To thrive in Canada you are going to need to be able to build wealth. Practically this means that you’re going to need to make more money than you need to spend to live. Check out budget calculator here to point you in the right direction.
A good site to use for cost of living is Numbeo. This sight allows a rough estimate of what you will have to spend to survive in your new home. If you put this together with the average salary for the jobs you’re likely to get you can have a fair idea of how much it will cost you to live in Canada.
How to Pick A Bank
The first thing to understand is that banking in Canada is a little behind the rest of the world. The same tools and products that you might be used to at home might only be getting released here in Canada. For example, I had a cell phone based debit card since 2014, probably 5 years before they became readily accessible to our Canadian friends.
The good news is though that most banks offer special incentives for newcomers to open accounts with them including credit cards that will help you get a better credit score. The main banks are TD, RBC, Scotiabank, CIBC, and BMO.
These banks will offer you an account with limited fees, although their fees are likely higher ($15 a month for a Checking account!) than you are used to anyway. They are solid choices for any newcomer and offer a lot of help tools and tips to adapt to life in Canada.
Slightly less geared toward newcomers but a favorite of settled Canadians, Credit Unions and Online Banks can offer low or no fee simple banking. They might be a bit more difficult to navigate at first but they are definitely a great option for later on or people that have time to pick a good bank. Some of the good ‘non big’ players at Tangerine, Manulife and Simplii.
Usually to open any of these accounts you will need your Social Insurance Number (available at Service Canada offices everywhere and some airports) as well as a piece of photo ID (A passport is safest at this early stage)
Note: Canada has charges to withdraw money at other banks ATMs, these fees can be ridiculous, so be forewarned!
How To Build Wealth As An Immigrant
There are a lot of ways to build wealth in Canada as an immigrant. For both short term and long term thinkers there are a range of government backed schemes that will help you along your way. The two most common and useful tools are the Tax Free Savings Account or TFSA (see our article here) and the Registered Retirement Savings Plan or RRSP.
The first thing to note about these two tools is that you a likely going to need around $1,000 spare per month to use them to their fullest extent. To put this into perspective, you’ll likely need to earn $60,000 per year to afford this. The beautiful thing about Canada though, is that both accounts roll over. This means that as you grow in your new Canadian life you will have a big pot of savings to contribute to!
The TFSA is basically just one big savings account. The Canadian Government allows workers to put aside a set amount of money every year (after tax) that can be used to invest tax free. What this means for you is that at present you can invest $6,000 a year into stocks and pay zero tax on any of the profits that you make.
In addition, if you investments grow, so does your investment room. That means that if your $6,000 becomes $12,000, you can cash out the entire account and still be able to refill it with $12,000.
If you can fill your TFSA for 10 years, and invest wisely, you will likely end up with an extra $10,000 vs a normal account. Over 30 years, this increases to an extra $175,000. In fact if you invest your TFSA in a low cost ETF as we did in our account, you could retire with enough money to generate $22,000 in tax free income a year!
Of course, it’s best to consult licensed financial advisors before making an investment decision.
Unlike the TFSA, the RRSP isn’t tax free, it’s merely tax deferred. This means that the RRSP is allowed be invested and grow in peace, without the tax man stealing any of it. That is, until you take money from it
The RRSP is treated like income when you withdraw from it so you have to pay income tax on it, in addition if you withdraw from your RRSP you end up paying between 10-30% withholding tax and then possibly additional income tax.
You also lose the contribution room. That means, unlike the TFSA, once you take out your money it is gone*. This could mean losing thousands of dollars due to early withdrawals.
The main benefit of RRSPs is that they tend to have a larger contribution room and employers tend to contribute a matching amount to them too, some as high as 5%! This means that you could be getting $3,000 in tax deferred investments straight from your employer.
*Thankfully you can liquidate your RRSP to fund the purchase of a house or to fund higher education. You do have to pay it back within 10-15 years but it can be a massive help. This is especially true of the home buyer’s plan which allows a married couple to withdraw $50,000 toward purchasing a home.
Immigrant Wealth Building
Those two investment vehicles are a great way to ensure that you can retire in comfort in your new life in Canada. You can of course invest in other, taxable, ways such a stocks and real estate. Canada offers great opportunities for people that start businesses and even though tax might be high, investments can still return big.
To build wealth in Canada over a 10-15 year period will require an income of around $100,000. If you can invest 20% of this you will likely have a net worth approaching $500,000. Of course even with just the TFSA you will have $500,000 within 30 years.
Fill your RRSPs and your TFSA, they are your route to wealth in Canada.
How to Understand The Job Market
The Canadian jobs market is not as strong as it once was, however there are still a lot of opportunities to get a better life for yourself. Check out our article on the Canadian economy as well as this piece which highlights some issues about working in Canada.
Understanding your local job market is key, finding good employment and building wealth depends on your skillset and networking abilities as well as where you choose to look for work.
You likely have already researched good places to find work in your industry before getting your visa. There are a couple of extra things to note however;
- Remote working is changing the face of Canadian business opening up more cities to people able to work from home
- Canadian employers will not accept foreign work experience unless it is from a big US named company.
- You will have to start at a lower level at network your way back up
A great tip is to organize some meetings with your local diaspora community in your new home city. These people understand the difficulties of finding work and may be able to help you.
To get a high paying job in Canada you should first find a good stable job that will allow you to build up resume experience (and make sure your resume is formatted for Canada!). You should then network and complect as much relevant experience as possible.
As a new immigrant you should try to think 3 promotions ahead in your planning. It might take ten years but building wealth in Canada requires you to move jobs fairly often.
How To File Your Taxes And Other Government Tasks
In Canada the government isn’t nice enough to calculate your taxes for you, you must file a Canadian and worldwide income tax return every year. This is a key part of life in Canada and many programs exist that will allow you to get a refund on tax you may have already paid.
The tax deadlines for employees in the end of April while the self-employed can filed as late as June. You should however keep a detailed view of your finances and be ready to file in March. The longer you wait the longer it takes Justin Trudeau to give you your money back!
There are many paid services that will file your taxes for you for a fee, such as H&R Block. However, Intuits free tool ‘Turbo Tax Free‘ is incredibly straightforward and taxes can be filled out in a couple of hours. The first time you file a return may be daunting but after a while you’ll be a pro.
Most other tasks can be carried out at a Service Canada office or a Registry. These places help you with everything from government ID to business issues, government programs, healthcare, welfare, and property issues. Generally speaking the staff are both friendly and multilingual.
Canadian bureaucracy may be slow but it does function about as well as other developed countries. Make sure to uses these services to help you settle and grow in your new life.
Do you have any money tips that you would give to new Canadian immigrants or immigrants in general? Let us know below in the comments.