Moving to a new country comes with a myriad of challenges, and managing finances is one of the most critical aspects. This financial checklist for newcomers to Canada not only helps newcomers navigate their new financial environment with confidence but also lays the foundation for a stable and prosperous life in Canada.
Although the basic financial principles of earning, saving and investing are the same, countries like Canada provide certain financial tools that can help you reach your goals fast with minimal burden. Read on to find out more about these tools.
Important Documentation and Identification
These are the primary documents that you need to make proper financial plans and maximize financial benefits in Canada.
Permanent Resident (PR) Card
If you’re a Permanent Residence, you should apply for your PR card as soon as you arrive. The PR card is an official proof of your status as a Permanent Resident of Canada. It’s an identification card that allows you to travel in and out of the country. It also helps you to access various services in Canada, including opening bank accounts, applying for credit, and securing employment.
Social Insurance Number (SIN)
The SIN is a unique nine-digit number issued by the Canadian government. It’s required for working in Canada and accessing government programs and benefits. Your SIN is essential for financial activities like receiving income, filing taxes, and contributing to social programs like the Canada Pension Plan (CPP) and Employment Insurance (EI). Without a SIN, you won’t be able to legally work or access many financial services.
Provincial Health Card
The Provincial Health Card is another important tool on the financial checklist for newcomers to Canada. It grants you access to healthcare services covered by the public health insurance system in your province or territory. Each province/territory issues its own card. Healthcare can be a significant financial burden without insurance.
The health card ensures you receive necessary medical care without out-of-pocket expenses for covered services. It’s also often required for obtaining supplementary health insurance or benefits through employers. You might need temporary private insurance until your provincial coverage starts.
Areas that Need Financial Planning for Newcomers to Canada
When you arrive in the country for the first time, there are certain financial plans you should endeavour to check off your list to help you settle in fine. These plans cover different important aspects of your living as explained below.
Income
Planning your sources of income is important especially if you did not travel under a work permit. There have been cases of many foreign students who had to leave Canada because they could not cope with the cost of living. It is important to know how many hours you are permitted to work and plan how you can make the most of it. Learn in-demand skills that pay more and develop strategies for finding a job as soon as you arrive in the country.
Budgeting
Budgeting is a common and important financial strategy that is easy to forget. However, it is a financial checklist for newcomers to Canada that you cannot afford to overlook. As a newcomer, you might face a period of financial uncertainty or limited income until you secure stable employment. Budgeting ensures that your basic needs are covered without overspending. Besides, without a budget, it’s easy to rely on credit cards or loans to cover shortfalls, leading to debt accumulation.
Taxes
Canada has a progressive tax system where higher income results in higher tax rates. Hence, it is essential for you to understand your tax obligations and plan accordingly. This will help you avoid penalties and interest charges. It is also essential for accessing government benefits like the Canada Child Benefit (CCB) or the Goods and Services Tax/Harmonized Sales Tax (GST/HST) credit.
Transportation
Transportation is a significant part of the cost of living in Canada. Hence, you need to plan for how you will get around. If you plan to live in larger cities, public transit is common while owning a car is necessary for rural areas. So, you need to know what means of transportation are available and affordable where you want to live. Without proper planning, transportation costs can quickly add up, whether it’s the cost of public transit passes, car payments, insurance, fuel, and maintenance.
Education
Planning for education is just as important as planning for transportation. It is an important part of the financial checklist for newcomers to Canada. Whether it is for yourself or for your kids. Canada offers a range of educational opportunities, but these often come with significant costs, especially for post-secondary education. However, you can explore financial aid options, scholarships, and government grants.
Housing
Housing is one of the things you need to start planning for even before you arrive in Canada. It is also the most significant expense for newcomers in the country. Canada has a wide range of accommodation options at different costs. Planning for housing helps prevent overspending beyond your financial capacity, which can lead to financial stress or even debt.
Bank and Financial Products for Newcomers to Canada
Below are some of the important financial tools that Canadian banks and financial institutions provide to help you plan and manage your finances. It is important to stay informed about these products so that you can make the most of them for better financial outcomes.
Tax-Free Savings Account (TFSA)
Familiarise yourself with the tax-free savings account. It is a flexible, registered account that allows Canadian residents to earn tax-free investment income. Contributions to a TFSA are not tax-deductible. So, any income earned, whether from interest, dividends, or capital gains, is completely tax-free, even upon withdrawal. Each year, the Canadian government sets a contribution limit, which accumulates if unused. Hence, allowing Canadians to save or invest more over time. It is an excellent tool for investing and saving in Canada for various goals without worrying about tax implications.
Registered Education Savings Plan (RESP)
If you are a parent with young kids in Canada, you may want to make the most of this product for your children’s education. The Registered Education Savings Plan (RESP) is a tax-sheltered savings account designed to help parents and guardians save for their children’s post-secondary education. So, when creating a financial checklist for newcomers to Canada, you shouldn’t miss it.
Contributions to an RESP are not tax-deductible. So, the earnings on those contributions grow tax-free until the money is withdrawn for education purposes. Starting early allows you to maximize these benefits. Thereby reducing the financial burden of education in the future and providing your children with greater opportunities.
Credit Card
Given the enormous financial responsibility that comes with moving to Canada, it is very likely that you may need financial aid of some sort. In such cases, a credit card might be a good option. A credit card is one of the primary tools for building credit. By using it responsibly—making payments on time and keeping balances low—you can build a positive credit history. This is critical for financial stability and accessing credit at favourable rates. It is also essential for future financial opportunities, such as renting an apartment, applying for loans, or securing mortgages for newcomers Canada.
This card allows you to borrow funds to pay for goods and services. However, the borrowed amount must be repaid, typically with interest if not paid in full by the due date. Credit cards often come with benefits like reward points, cashback, and travel insurance, depending on the card type.
Debit Card
Like in most countries, debit cards in Canada provide a secure and convenient way to manage day-to-day spending without the risk of accumulating debt. Hence, it is an indispensable part of the financial checklist for newcomers to Canada. Unlike credit cards, debit cards ensure that spending is within the limits of the available bank balance. Hence, helping you stay within your budget.
This card is typically linked directly to a chequing or savings account. When used for transactions, the money is immediately deducted from the account. Debit cards are widely accepted for everyday purchases, online shopping, and ATM withdrawals.
Chequing Account
A chequing account is a type of bank account designed for frequent transactions, such as deposits, withdrawals, and bill payments. It typically offers features like cheque writing, debit card access, and online banking. Chequing accounts often come with monthly fees, which may be waived if certain conditions are met, such as maintaining a minimum balance or setting up direct deposit. This is one of the financial tools you will need to manage day-to-day finances in Canada.
Savings Account
As part of your financial planning, it is important to factor in saving either for emergencies or short-term goals. A savings account allows you to do this conveniently. It is a bank account that pays interest on the deposited funds. Hence, making it an ideal place to store money that isn’t needed for immediate expenses. Savings accounts generally offer lower interest rates than investment accounts but provide higher liquidity, allowing for easy access to funds when needed.
Private Health Insurance
Although Canada has a publicly funded healthcare plan, it does not cover all medical expenses. So, private health insurance provides additional medical coverage that supplements the publicly funded plan.
While the public healthcare system covers essential medical services, private health insurance can cover a broader range of services, including prescription drugs, dental care, vision care, and access to private hospitals or specialists. This insurance can be purchased individually or provided as part of an employee benefits package.
Depending on your province or territory, it might be important to get private insurance when you arrive. This is because some regions have waiting periods before you become eligible for public health coverage. Hence, it is an important aspect of the financial checklist for newcomers to Canada.
Other Insurance (Auto, Life, Tenant)
Aside from private health insurance, there are other types of insurance that serve to protect individuals from financial loss in different areas. You may want to consider them depending on your personal needs. For instance, auto insurance is mandatory for vehicle owners in Canada. It covers liabilities and damages in case of accidents.
Life insurance on the other hand provides a financial payout to beneficiaries upon the policyholder’s death. Hence, helping to support loved ones. Whereas, tenant insurance, or renters insurance, protects personal belongings in a rented property and provides liability coverage for damage or injury within the rental unit.
Car Loans and Leases
If you live in a rural area in Canada where owning a car is necessary and you intend to stay there for a long time, you may need to make plans about getting a car. Car loans and leases are some of the financial options available for you to achieve this.
These options allow you to acquire vehicles without paying the full purchase price upfront. A car loan involves borrowing money from a lender to buy a vehicle, which is paid back with interest over a set period.
A car lease, on the other hand, is an agreement to rent a car for a specific period. Typically, with lower monthly payments than a loan. However, with restrictions on mileage and eventual return of the vehicle at the end of the lease term.
Conclusively
Establishing a solid financial foundation is essential for any newcomer to Canada. It ensures that they can confidently manage their finances, protect their assets, and build a stable future in their new home. By following a well-rounded financial checklist for newcomers to Canada, you can avoid common pitfalls, make informed decisions, and take advantage of the financial opportunities available in the country.
