Welcome to Canada! Adjusting to a new country can be exciting, but it can also bring challenges for youself and your family, especiacially when it comes to management of your finances.

1. Understanding the Canadian Financial System

• The federal government of Canada is in charge of enacting legislation and enforcing regulations that control the Canadian financial sector. They work to ensure a stable financial system and to protect customers. The Canada Deposit Insurance Corporation is one example of such consumer protection, as it provides insurance against deposit loss in the event that a member financial institution fails to satisfy its commitments. 

• The Canadian financial system is made up of financial institutions (banks, credit unions, and finance corporations), financial markets (money, bond, equity, mortgage, and foreign exchange markets), and financial services (firms that provide financial and investment advice). Collectively, they provide consumers with access to financial products and services that enable them to spend, save, and invest. 

• The Canadian financial system is a vast and intricate one, and for new immigrants, it will definitely be different from what you may have been used to. It is important to get to know what financial institutions, products, and services are available. This can prevent the settling-in phase from being stressful and also set the stage for you to achieve your financial goals. 

2. Building a Strong Credit History. 

• Apply for credit only when needed. 
• Try to avoid applying for too much credit in a short period of time. Having a large amount of inquiries on your credit report can lower your credit score, especially if you do not have a long credit history. 

• By managing your credit wisely, you can begin to build a strong credit history. A strong credit history will help you to get approved for the amount of credit that can help you to establish a good life in Canada, including a car loan, personal loan, or mortgage. 

3. Managing Expenses and Budgeting

• A good savings opportunity can be found in reducing food costs. Cultural food consumption takes some time to adjust to Canadian standards, and with a significant increase of grocery costs, many immigrants often find that their food expenses have doubled. A desirable goal would be to save money to compensate for the greater costs of seasonal items that may not have been necessary to purchase in the immigrants’ homeland. For example, if savings are found on winter clothes, the purchase of these items can be funded interest-free until the items are actually required. 

• An effective budget can be created using the budget spreadsheet mentioned. This is an excel spreadsheet used in conjunction with the tracked expenses to set limits for variable spending and to monitor saving and investment goals. The budget should allocate that which is necessary to meet fixed expenses, as well as realistically limiting variable expenses usually with a goal to increase the rate of savings increments. 

• The saving of receipts is crucial as they often contain vital tax information for eligible tax credits. Expenses should be divided into 2 categories: fixed and variable. Fixed expenses are those which remain constant from month to month – rent, insurance, internet, etc. Variable expenses are those which are a matter of personal choice, i.e. delivery, dining out, cable TV, etc. Through tracking of expenses, a clear picture will emerge of where to reduce variable spending. Usually, small daily purchases add up to surprisingly large amounts. For example, if a couple that eats dinner out 2 times a week were to spend $30 each time, this would total $240 in a month. 

• Critical to effective expense management is the tracking of all expenses for at least one month. This is a tedious process but invaluable in terms of giving a clear indication of where money is being spent. This is best done using debit or credit cards for all purchases, with cash used only for items for which there will be no receipt – public transportation, food at work, etc. All receipts should be saved, and purchases written down in a small notebook. This record will be essential for the use of the budget spreadsheet noted below, as well as for tax purposes. 

• Immigrants are faced with new living expenses in Canada. Items ranging from renting and utility deposits to car and even winter clothing expenses can severely strain savings as well as hamper efforts to correctly establish a new life. We frequently see new immigrants confronted with financial adversity as a result of a very common deficiency in comprehensive financial planning. The following are some suggestions on effective expense management and budgeting. 

4. Investing and Saving Strategies

• To protect the money that you have already or the money to be earned for short-term goals, the safest place to save is using a high-interest savings account. With a high-interest savings account, the money is guaranteed and is accessible at any time. However, the drawback is the low return as it does not usually keep up with inflation. Also guaranteed and with a low level of risk and a higher potential return is the purchase of GICs (Guaranteed Investment Certificates). Another option for more long-term saving is the use of a Registered Education Savings Plan. 

• When considering whether to save or invest money, you must evaluate and consider how the risk of your investment may affect the ability to reach your financial goals. Since most investment opportunities come with the possibility of losing money or failing to match the rate of inflation, it is essential to fully comprehend the risks involved in order to make an informed decision. 

• Start by setting specific savings and investment goals. Like anything else, target setting is very important. Begin by figuring out the total amount of money you will need to satisfy your day-to-day expenses as well as all your long-term financial obligations. Then set a target date for your different savings goals. This will help to quantify the amount of money you will need in the future and better understand the time frame associated with each goal. Remember to be realistic about the returns you expect on your investments to avoid trying to take on too much risk in the later years when you are trying to conserve capital. 

• Investing and saving strategies are the important elements of financial planning. By implementing a strategy of goal setting and understanding investment risk, Canadian newcomers will be better prepared to achieve their financial goals. 

5. Seeking Professional Financial Guidance

• If you decide to seek professional help with your finances, you should consider someone who understands your specific situation such as a financial planner, accountant, or lawyer. These professionals should have strong knowledge of the financial issues of recent immigrants. The advisor should be able to understand your situation, listen to your concerns, and provide a service tailored to your needs. Advisors can provide suggestions on personal financial management, help you create a budget, advise you on investment products, and help you obtain credit. Advisors can also help with purchasing a home, a key concern of newcomers. When seeking professional financial guidance, be sure to consider the cost of the service. Get quotes from different professionals and ask for written explanations of what the professional will do for you. With the information you provide, the advisor should provide a clear and timely assessment of your situation and provide you with a clear statement of the goals they will help you meet. Remember to regularly assess the impact of the professional’s advice on your situation and obtain a second opinion on important decisions. An advisor who was helpful for a newly landed immigrant he knew recently recommended immigrants first try to find out as much information on their financial concerns as possible before seeking professional advice. This will reduce the amount of time a professional needs to spend researching the best course of action and can greatly reduce the cost of their services. Although it’s good if the professional has knowledge on a specific issue, don’t be a guinea pig. A guinea pig is someone who, through the recommendation of their advisor, ends up trying new and unsure financial actions which may have negative implications. An advisor should be able to clearly explain the action and its implications on your situation. 

References:  

Durodola, O., Fusch, P., & Tippins, S. (2017). A case-study of financial literacy and wellbeing of immigrants in Lloydminster, Canada. International Journal of Business and Management, 12(8), 37-50. 

Mmangyo, I. (2023). Hindsight: Immigrant’s Guide to Informed Financial Judgements. Ottawa Publishing. 

Khan, M. N., Ferrer, I., Lee, Y., & Rothwell, D. W. (2022). Examining the financial knowledge of immigrants in Canada: a new dimension of economic inequality. Journal of Ethnic and Migration Studies, 48(13), 3184-3201. 

Jones, S. (2004). Canada and the globalized immigrant. American Behavioral Scientist, 47(10), 1263-1277. 

Date modified: 2024-04-27