How new Canadians can find their financial footing

Landing a job is one of the biggest hurdles that newcomers to Canada face. Establishing a financial footprint is another one.

More than 80 per cent of new Chinese-Canadians and South Asian-Canadians in particular cite having enough money to cover daily expenses as their key priority, according to a new BMO Wealth Insitute report called Finding the Path to Financial Prosperity for Newcomers to Canada found.

Canada welcomes about 257,000 newcomers each year from more than 190 countries, according to Citizenship and Immigration Canada.

Without any credit history in their newly adopted country, tasks that mainstream Canadians may take for granted — such as renting an apartment, acquiring a credit card or being approved for a mortgage — may be that much harder.

“Credit history from the country or origin is not going to be accessible, so it’s important to start achieving credit when coming into a new country,” explains Wade Stayzer, vice president of retail and investment services at Meridian Credit Union. “It’s about being proactive.”

Applying for a credit card is a good place to start

“Whether it’s a low-limit or fully guaranteed credit card where you put $1,000 down on deposit, once you apply you can build it so you’re credit-worthy,” Stayzer says. “Establishing a credit history takes time.”

Some institutions have products targeted specifically to immigrants, such as BMO’s NewStart program, RBC’s Landed Immigrant package, CIBC’s Newcomer to Canada offer, and TD’s New to Canada package, to name a few.

Of course, once a source of credit has been secured, there’s nothing more important than making payments on time, every time.

It helps to have a strong co-signer for things like personal loans in the early days too, Stayzer notes.

The importance of budgeting and taxes

To maintain their financial stability, just like established Canadians, newcomers are advised to begin budgeting right away.

“When new Canadians come to Canada, once of the challenges may be seeking employment and so income or cash flow may be tight,” says Chris Buttigieg, BMO Financial Group‘s senior manager of wealth planning. “Having a budget and tracking spending will certainly help.”

Knowing their tax obligations from the get-go is vital for immigrants as well, Buttigieg says.

“Filing a tax return every year is especially important for new Canadians, filing even when income is low or non-existent, because by filing you become entitled to the GST credit and the child-tax credit,” he says.

Plus, new residents are required to pay taxes on their worldwide income, and the Canada Revenue Agency will want to know the status of any foreign-owned property.

Planning for the future

Having a financial plan can help Canadians, new or not, reach their financial goals. among Chinese-Canadians and new South Asian-Canadians, aside from having enough money to cover daily expenses, top priorities were identified as saving for their children’s education, for illness, for retirement, and for their parents’ retirement.

Whether it’s through tax-deferred plans such as Registered Retirement Savings Plans (RRSPs) or vehicles like Tax Free Savings Accounts (TFSAs), minimizing the amount of tax payable on income earned each year can make a big difference in people’s bank balances.

“It can be challenging for everyone to follow through with financial goals,” Buttigieg says. “A financial plan helps you with priorities like saving for children’s education and saving for retirement and is a great tool to allocate resources to achieve those goals.

To develop a financial plan, Stayzer urges newcomers find a financial institution that’s willing and able to hear their story to best suit their needs.

“Find one that’s consistent with your values,” he says. “With all of complexity of being a newcomer, when there are language barriers and everything’s new, that’s when relationships become even more important. If a financial institution says no to you, you’re at the wrong institution.”