Picking a bank
Once you’ve arrived in Canada, one of the first things you’ll want to do is open up a bank account. Canada’s banks are very stable and unlikely to fail. In addition, any deposits you make up to $100,000 are protected by the Canada Deposit Insurance Corporation‡‡, so sleep easy knowing that your money is safe.
You can always shop around to see which bank offers you the most value for your needs. But, as a new immigrant, you might be making more visits to the bank than the average Canadian, so convenience and location should be considered.
It’s also worth checking with the bank to see if there is an employee who speaks your first language, but this consideration shouldn’t win out over the more important factors mentioned above.
There are five major banks in Canada:
- Royal Bank of Canada (RBC)
- Toronto-Dominion Bank (TD)
- Bank of Nova Scotia (Scotiabank)
- Bank of Montreal (BMO)
- Canadian Imperial Bank of Commerce (CIBC)
Most banks in Canada provide similar services, such as chequing and savings accounts, safety deposit boxes, and credit cards. Interest rates offered on basic savings accounts are usually low, which is why many people also use online banks. Most checking accounts come with a small monthly fee, but one thing to consider looking further into are the premium accounts that offer you more services (with a slightly higher fee).
Because of growing competition from online banks, many of Canada’s traditional banks are offering more products to attract clients. Some things to consider when looking for the best bank in Canada are whether or not it offers multiproduct savings, competitive fees, special discounts for immigrants and/or seniors, high-interest guaranteed investment certificates (GICs) and more.
Canada also has a few branches of major international banks such as the State Bank of India (SBI). Although these may be banks you’re already familiar with and naturally more inclined to choose, keep in mind that they have limited branches in Canada, and it may not make sense to use them for your daily banking needs.
Online banks/alternative financial companies
In addition to traditional brick-and-mortar banks, over the last decade, there has been a growing number of online banks gaining a dedicated following in Canada. Their rising popularity is because, by and large, they offer interest rates for checking and/or savings accounts (as well as GICs and TFSAs and more) that are much, much higher than traditional banks.
Many digital banks even offer a relatively new product called a hybrid bank account, which combines the money-saving interest rate of a savings account with the convenience of a chequing account. Furthermore, most digital banks don’t charge any fees for daily banking transactions, which can save account holders hundreds of dollars a year.
Of course, perks like high-interest-rate accounts and no fees come with some drawbacks. Most digital banks don’t have physical locations so you can’t go into a branch to speak face-to-face with someone, which means you have to be comfortable conducting your banking through a computer.
Online banks also don’t generally feature all the offerings that full-service, conventional banks do, so you aren’t likely to get a mortgage, a full suite of accounts or investment products from an online-only bank. But if those drawbacks don’t deter you from the money savings benefits of a digital bank, then it’s worth exploring our pick for Canada’s best online bank.
EQ Bank is relatively new to the Canadian financial landscape, having launched at the start of 2016. But don’t let EQ Bank’s “youth” frighten you off; they’re a trademark of Equitable Bank, which has operated in Canada for over 45 years and is a federally regulated Schedule I Bank. Furthermore, deposits up to $100,000 with EQ Bank are protected by the Canada Deposit Insurance Corporation‡‡.
EQ Bank consistently offers some of the highest rates for GICs and savings accounts in the entire country, including its Personal Account, a hybrid chequing and savings account with an interest rate of 2.50%*. Additionally, EQ Bank charges no monthly fees and offers free transactions and inexpensive international money transfers.
- Interest is calculated daily on the total closing balance and paid monthly. Rates are per annum and subject to change without notice.
‡‡ Equitable Bank is a member of CDIC, which means your deposits with Equitable Bank and EQ Bank are eligible for deposit insurance from the CDIC.
Building your credit score
Unfortunately, new immigrants to Canada will not be able to carryover their credit score from their previous countries, and need to rebuild theirs from scratch. If you’re unfamiliar with the idea of a credit score, it’s a number between 300-900 that determines how creditworthy you are. The higher your number, the more likely that you’ll be approved for a loan in the future.
Use a secured credit card
A credit score can be gradually built up by using a credit card and paying the monthly balance off consistently. As a new immigrant, you may only qualify for a secured credit card immediately following your immigration. These secured cards require a deposit, but since the card issuers report your payments to the credit bureaus, you’ll increase your score over time. Always pay your full balance every month so you don’t have to pay interest charges.
Use a credit building tool
The importance of a good credit score can not be overstated. A good credit rating can have a major influence on things like finding a job, getting loans, renting an apartment and even owning a home. Luckily there are financial companies that can help you increase your credit score like KOHO, which not only offers a pre-paid Mastercard but also has a Credit Building tool that helps you begin building your credit for only $5-$10 a month for 6 months.
Get a credit card
To secure your financial health it's especially vital for newcomers to build a solid credit history as soon as possible. As mentioned above, a good credit score can have a major influence on things like employment and housing.
One of the best and fastest ways to build a high credit score is to get a credit card and use it responsibly by paying off the balance on time every month. Credit cards will also help with things like online shopping, accessing emergency cash if needed and you can even earn rewards or cash back — even without paying an annual fee. Fortunately, Canada has numerous credit cards that are ideal for new immigrants.
Choosing where to live
Simply put, real estate in Canada is very expensive. The major cities of Toronto and Vancouver have some of the highest real estate prices in the world. The good news is that outside of those two cities, prices are much more reasonable and there are many top places to live in all parts of the country.
Many new immigrants believe that owning a home is the key to financial success, but with prices where they’re at now, that may not be true. Sure, real estate prices have skyrocketed as of late in Canada, but if you stretch out your budget just to own a home, things could get complicated.
When purchasing real estate, you need to look beyond the monthly mortgage payments. What good is owning a home if you can’t afford to save for your retirement, pay for your kids’ activities and education, or take vacations? Take the time and run the numbers to ensure that your desire to own a home won’t ruin you financially.
If you decide to purchase a home, make sure to use a realtor who works in real estate full time and understands your needs. Some new immigrants choose familiarity, opting for a realtor that is a family friend or someone who is offering a lower commission. A home is likely going to be the most expensive purchase of your life, so you should use someone who is truly passionate and knowledgeable about real estate and will dedicate their full attention to you.
Investing your money
After establishing yourself in Canada, you’ll likely start thinking about saving money long term. Fortunately, there are two great savings accounts in Canada with various benefits: the Registered Retirement Savings Plan (RRSP) and the Tax-Free Savings Account (TFSA).
Both accounts allow you to invest in just about everything, including mutual funds, exchange traded funds (ETFs), stocks, GICs, bonds, and much more. The differences in the accounts come down to how taxes are handled and how much you can contribute.
RRSP highlights
- Contributions reduce taxes
- Taxes deferred (you pay tax when you withdraw)
- Contribution room is based on 18% of your previous year’s income (minus any adjustments)
- Early withdrawals are considered earned income, unless used for the Home Buyer’s Plan or Lifelong Learning Plan.
TFSA highlights
- Contributions do not reduce taxes
- All gains within your TFSA are tax free (never taxed)
- You can contribute up to $5,500 every year (subject to change)
- Withdrawals are always tax free
With these accounts, you can invest in them yourself or you can work with a financial advisor. If you do decide to work with a financial advisor, it’s important to select someone who has valid credentials. Quite often, new immigrants tend to choose a financial advisor who speaks their native language. There’s nothing wrong with this, but you should do some research on the person who will be managing your money. First and foremost, they should be experienced investors, with the comfort of a common language and cultural background being of secondary concern.
You can look up any potential advisor’s registration, disciplinary record and their relevant education via the search tools available from the Canadian Securities Administrators and IIROC.
One other thing to note about financial advisors: never work with someone, regardless of his or her credentials, who promises you something that sounds too good to be true. If they’re telling you that they can earn you 10% returns with no risks, they’re likely lying or operating some kind of Ponzi scheme. Canada has very low levels of corruption and fraud compared to most other countries, but it still exists to some degree, and unfortunately, it’s not unheard of for immigrants to be targets of exploitative practices. You’ve worked hard for your money, so be careful with whom you entrust it.
If you don’t choose to go with a financial advisor, you might want help in the form of a robo-advisor. Our recommendation is Wealthsimple — it's incredibly popular in Canada and has a solid trustworthy reputation. The company uses special algorithms to invest in low-cost ETFs and charges incredibly low management fees. All you need to do is answer a few simple questions and select which investing portfolio you feel most comfortable with and Wealthsimple does the rest.
Send money home
Sending money back home is pretty straightforward, but fees, daily limits and hold times may prove annoying. Make sure you fully understand how much you’ll be paying in fees when you send money internationally.
Get ready to file taxes
Normally, tax time in Canada for individuals falls on the last day of April 30. If you have any questions at all it’s best to give the Canadian Revenue Service a call or visit their website because you don’t want to get on the bad side of the taxman.
If you're a freelancer or a gig worker (which is a popular option for many Canadians as they search for a full-time job) tax rules are even more complicated and it may be worth at least getting a consultation with a tax accountant. You can also check out this Government of Canada website for tax info specifically for immigrants.
If you decide to tackle your income tax on your own, we recommend TurboTax. The user-friendly software (there is both a free and a paid version) makes doing your own taxes incredibly easy, guiding you every step of the way. The software even features sections that cover things like whether you’re a student, if you own property, and it points out deductions you might be eligible for.
Find the right insurance
Once you are more settled, you’ll likely start thinking about things like car and home insurance, and eventually maybe even life insurance.
For home insurance, we recommend consulting InsuranceHotline.com. The online platform gives you the best home insurance quotes from more than 30 Canadian providers in a single search.
A great resource for life insurance is PolicyMe; the online-only insurance company provides a quick and easy way of getting a competitive policy on term life and critical illness insurance in minutes at an incredibly affordable price.
Helpful tools to use
Managing finances can be overwhelming at the best of times. Here’s a roundup of some of our favourite financial tools.
- KOHO is a pre-paid card that combines with a mobile app to give you insights about your spending. KOHO Easy is a free, reloadable Mastercard that earns you up to 5% extra cash back at partnered merchants.
- Ampli is a handy app that you download on your smartphone to earn cash back on purchases from dozens of online retailers, like Indigo.ca, WestJet, Roots and more.
- YNAB, or You Need a Budget, is a powerful budgeting app. It helps you manage your money and track your spending, credit card and investment accounts even in different currencies.
A solid financial foundation is key for anyone
While landing in a new country will undoubtedly have its challenges, it will also be the beginning of a wonderful adventure in a new homeland. Getting your finances in order and managing them smartly will provide a solid foundation for a successful new life for you and your family in Canada.
Sources
1. Peninsula Canada: Are They Registered?
2. Canadian Investment Regulatory Organization: Know Your Advisor: Advisor Report
4. Government of Canada: Benefits, credits, and taxes for newcomers
