Financial tips for newcomers to Canada

There’s much to learn when you arrive in Canada – like what it really means to be cold, that a three-hour drive really is fine for a day trip, and what a “double double” is.

There’s also much to learn when it comes to managing your finances. Canada has one of the safest and most tightly regulated banking systems in the world, and it’s not always intuitive. 

From getting a bank account to managing credit and creating a budget, here are our top financial tips for newcomers to Canada.

1. Pick the right bank account

Having a bank account is essential for life in Canada. The type of account you’ll need for daily banking is called a chequing account. With a chequing account, you can have employment income directly deposited, send and receive money within Canada and internationally, pay bills, make point-of-sale purchases, and withdraw cash.

When selecting a chequing account, be aware of:

• Monthly fees. Many, but not all, chequing accounts charge a monthly service fee that includes a certain number of transactions and services. Fees range from $0 to $30 per month depending on the bank and what features are offered. Many banks waive the monthly service fee for newcomers to Canada.
• Transaction fees. If you go over your account’s transaction limits, you’ll be charged a fee that typically ranges from $1 to $3 per transaction. These fees vary from bank to bank, and some transactions may cost more than others.
• Options for customer service. Canada’s biggest banks have branches in communities across the country, but be prepared to pay a premium for in-person customer service. You can save on banking fees by choosing a digital bank.

You may also want to open a savings account that pays interest on your deposits. Savings accounts usually have no monthly fees, but high transaction fees that make them unsuitable for daily use.

Canada has many banks and other financial institutions that offer chequing and savings accounts. You will find a different mix of products, services and fees depending on the type of bank you choose.

The Big Five Banks

The Big Five Banks all have locations in communities across Canada and large ATM networks that make it easy to withdraw cash when you need it. The Big Five Banks tend to charge higher fees than others.

The Big Five Banks are:

• RBC Royal Bank
• TD Bank
• BMO Bank of Montreal
• Scotiabank
• CIBC Canadian Imperial Bank of Commerce

Other large, national banks include:

• National Bank
• Desjardins
• HSBC (which was acquired by RBC in 2022)

Digital banks 

There are a number of digital banks in Canada that don’t operate any branches, instead requiring customers to do their banking online or by phone. Many of these banks offer no-fee chequing accounts that include free access to another bank’s ATM network. The best digital banks in Canada include:

• Tangerine
• Simplii Financial
• EQ Bank
• Motusbank

Credit unions

Credit unions are non-profit organizations that provide financial services to their members, including bank accounts. They usually have a small number of branches within a single community, but some serve larger areas or an entire province. Some of Canada’s biggest credit unions include:

• Coast Capital Savings
• Meridian
• VanCity

Learn more about selecting the right bank account in our article on the best bank accounts for newcomers to Canada.

2. Improve your credit score

In Canada, your credit score represents how responsible you are when it comes to borrowing money. The three-digit score ranges from 300 to 900, and higher is better. The average credit score is 650, and a score of 680 or higher will usually grant you access to the best credit cards, mortgages and loans.

Also read: How your credit score affects your mortgage

There are several factors that affect your credit score, including:

• The length of your credit history. The longer you’ve had and used credit in Canada, the better.
• Your payment history. Making payments on time has a positive effect on your credit score. Missed or late payments have a negative effect.
• Your credit utilization. When you’ve used a high percentage of the credit that’s been extended to you, it can lower your score.
• Recent credit applications. When you apply for a new credit card or loan, it can temporarily lower your credit score. The more credit checks that appear on your report, the greater the impact will be.
• Collections and bankruptcies. If a borrowing account has been sent to collections, or if you’ve declared bankruptcy in the last 7 years, it will greatly reduce your credit score.

Improving your credit score requires establishing a borrowing history in Canada and using credit responsibly.

One of the best ways to establish a credit history in Canada is to get a credit card and pay the balance in full each month. You may be able to get a credit card without any credit history if you’ve received landed immigrant or permanent resident status within the last 5 years, or have a work permit with a term of at least 12 months.

Find out more about how to get a credit card in Canada by reading our article on the best credit cards for newcomers to Canada.

3. Create a budget

Life in Canada can be expensive, and it’s important to have a realistic budget to make sure you can pay for the things you need.

Your major expenses in Canada will be housing, food and transportation. Primary health care is publicly funded, but you will also need to budget for extended health expenses like prescription medications, eye care and dental care.

This table shows how the average Canadian household spends their money – both in 2019 when the most recent data was collected, and adjusted for inflation.

4. Save and invest 

Canada offers several programs to help you save for your future. All of these registered accounts have some tax advantages and can be used for different purposes. They can hold cash savings, as well as investments.

Tax free savings account

The tax-free savings account (TFSA) allows you to save money without having to pay income tax on your investment income. The contribution limit is expected to be $7,000 in 2024, and you can carry unused contribution room forward.

Registered retirement savings plan

The registered retirement savings plan (RRSP) allows you to defer income tax to retirement. When you contribute to your RRSP, it reduces the amount of income tax you have to pay that year. You will have to pay income tax on the money you withdraw from your RRSP in retirement.

You should know that RRSP savings can also be used to purchase a first home, as long as you haven’t owned a home for at least four years. You can withdraw up to $35,000 tax-free to buy or build a qualifying home, and then repay that amount to your RRSP over 15 years.

Registered education savings plan

The cost of a four-year degree in Canada is estimated to be over $48,000 not including living expenses, so it’s important to start saving early for your child’s future. Contributing to a registered education savings plan (RESP) reduces tax on investment income and opens access to government grants.

First home savings account

Another tool to save for a first home is the First Home Savings Account (FSHA). You can contribute up to $8,000 per year to a maximum of $40,000 in your lifetime. Contributions may be deductible on your income tax, and you can withdraw money tax-free to buy or build a qualifying home.

5. File your taxes

Canadian residents are required to file taxes each year, and you may have to file even if you didn’t have any income the previous tax year.

The tax year in Canada is January 1st to December 31st. You should receive all the necessary slips by the end of February, and the deadline to file and pay any amount owing is April 30th.

You may qualify for one or more programs that will reduce your income tax burden. A few common deductions include:

• RRSP contributions. If you contributed to your RRSP, you can deduct that amount on your taxes.

• GST/HST credit. Depending on your income and family status, you may qualify for a tax credit to offset the cost of sales taxes.
• Canada Workers Benefit. If your income is less than $43,000 per year, you may be eligible for a tax credit of up to $1,200.
• Canada Child Benefit. If you have children under 18 years old, you may qualify for a benefit of up to $620 per month.
• Childcare expenses. If you paid a registered provider for childcare, you can deduct that amount on your taxes.

 

The bottom line

Getting your finances sorted out can be stressful as a newcomer to Canada, but there are steps you can take to make things easier. Start by getting the right bank account and credit card, and don’t forget to take advantage of government programs to make it easier to save for your family’s future.

Also read:

• How to build credit as a newcomer
• Credit card basics
• Chequing account basics
• The best secured credit cards in 2023