“He who gathers money little by little, makes it grow.”
If you are a new immigrant to Canada, you have to quickly understand how the financial system works, so that you can make the best of it.
Even if you have been in Canada for years, these tips will help you achieve financial fitness faster.
Financial tips for newcomers to Canada.
- Credit score is king
Some newcomers to Canada are initially reluctant to take any credit card or buy anything on credit. They are not familiar with the Canadian financial system and are used to paying cash for most items.
Welcome to Canada. In Canada, you need to have a good credit history and a good credit score to function properly. Essentials for newcomers such as renting or buying a house, purchasing a car or even a phone plan, all start with a credit check and your credit score.
So, it’s OK to get a credit card, use it responsibly and pay all your bills on time. That’s how you get a great credit score and build a strong credit history. This is the top financial tip for newcomers to Canada.
- If you don’t have it, don’t spend it
For the immigrant who does not want to run into a financial hole, the first rule of the credit system is: “If you don’t have it, don’t spend it.” Before you buy things with your credit card, make sure the money is available in your bank account for repayment. Don’t bank on money that you expect to come in “soon.” It is worse if you are not working yet.
Newcomers run into trouble and soon resort to payday loans when they overrun their credit cards.
- Start saving to retire a millionaire
Once you land in Canada and start earning money, set your financial goal: short-term and long term. Set yourself an investment goal.
Start planning for your retirement. Open an RRSP account immediately and be making monthly deposits into the account. You will be amazed at how quickly it grows. Don’t say you will wait till you land a lucrative job before you start saving in your RRSP account.
For example, given an average 7% return per year, saving $300 per month for 35 years will end up being $500,000. However, with other strategies, you might reach $1 Million in 24 years.
Becoming a millionaire is not as difficult as it seems.
- Beware of scams
As you are trying to earn money, some unscrupulous people are somewhere trying to steal your money. Many will come with different proposals to double your investment within a short time. Many will send you messages and emails with links about a supposed financial windfall, returned payment, or bogus employment offers.
The rule as always is: If it sounds too good to be true, it probably is.
- Be wary of credit card “gifts”
At shopping malls and other places, different companies would urge you to collect their credit cards with as high as 10,000 Canadian-dollar thresholds. The offers may be tantalizing. But they are also a huge risk. The companies would pray that you accumulate huge debts on those cards that you cannot quickly pay. That way, they make more money from the huge interest you pay.
- Don’t consume your child’s benefit
If you have children, the Government gives you about $400 per child every month. Some parents spend most of it on shopping or fancy clothes. Smarter parents just save most of it and act like it doesn’t exist.
If you invest $200 from your child’s benefit every month, from age one, you would have a windfall of $69,842.44 by the time your child turns 18, given a 5% annual interest.
The Government of Canada also matches whatever you have saved by 20% up to an annual limit of $500.
- Consider starting your own business
The Government encourages entrepreneurship. If you have a skill you can sell, feel free to explore it.
Interestingly, you can have a full-time job and still have your own business. What matters is to have the mindset of an entrepreneur.
- Don’t joke with your tax
Part of the way to be a responsible, credit-worthy citizen is to file your taxes at the expected time and pay all that you are expected to pay.
You can be smart about your taxes and find legitimate ways to pay less tax. But delaying or dodging your taxes will land you in a deeper hole than you can imagine.
- Don’t look down on blue-collar jobs
Contrary to the perception many have about white-collar jobs, many blue-collar professionals (like plumbers, carpenters, electricians, mechanics, etc) make a lot of money in Canada – sometimes as high as medical doctors or even higher.
It is hard for newcomers to believe that many skilled workers can earn as much as $200,000 a year when many of those who work as white-collar professionals struggle to earn $60,000.
- Flee from payday loans
Unless you are almost at the point of death, you should avoid payday loans like a plague. This is probably the most important financial tip for newcomers to Canada.
Payday loans can be tempting when you have limited financial resources, but it is highly dangerous for immigrants. The average two-week payday loan has a fee of $15 per $100 borrowed — an APR that equates to almost 400% per loan!
Canada is yours to discover
To be financially successful in Canada, you need the skills, experience, and the right opportunities. But the biggest key to success is your attitude. You will soon find out that Canada is all yours to discover.
By Azuka Onwuka