5 things newcomers need to know about personal finance in Canada

My parents immigrated to Canada in the late 80s, before internet was available for the every-man and long before FinTech hit the scene. It was a very different time for newcomers. Back then, the challenge was finding information about financial products. Today, there’s an abundance of information on the internet and the new challenge is, how do newcomers make sense of it?

To get more insight, I spoke with Bernice Cheung, the vice president of Cultural Markets and Financial Services at Environics Research Group. After working with hundreds of new Canadians over the last six years, Cheung says today’s generation of newcomers is actually more connected and informed than previous generations were; they’re researching their options online and preparing for financial discussions ahead of time.

Currently, many of these newcomers seem to start their information hunt with Canada’s government resources. All well and good — but there’s more to know about Canadian finance and we’re here to tell you about it.

1. You have lots of banking options to compare

Step one is open a Canadian bank account. “Most newcomers set up their chequing account within their first week of moving to Canada”, says Cheung. After all, before you can apply for a credit card, mortgage, or personal loan, and before you can start building up your Canadian credit history, you need an account.

Good thing financial institutions make it easy. Major Canadian banks offer newcomer packages, which usually means they won’t charge monthly account fees for the first six-to-12 months and they’ll give you discounts on other financial products, like safety deposit boxes or auto insurance.

With all the banking options available, you need to research carefully. Try the Financial Consumer Agency of Canada’s online tool to compare chequing and savings account features from different institutions. The research may surprise you. According to Cheung, while most new immigrants still default to the big banks, long-tenure immigrants (those living in Canada for 10 years or more) are following the trend of the industry: they’re open to digital banks like Tangerine or PC Financial and willing to make the switch.  

2. The new era of credit history starts with credit cards, not mortgages

My parents rented a teeny, tiny apartment in Scarborough until they could afford their first major investment: a house. It was nothing special, but at a price tag of $155,000, it was still a steep cost for two young immigrants in 1991. And owning a home was important for newcomers of that time. As Cheung explained to me, building credit history was very difficult for newcomers 20 or 30 years ago; they often needed to buy a house, so they could use it as collateral.

Today, establishing a Canadian credit history is much simpler.

“Banks have put a lot more focus on credit cards for newcomers,” explains Cheung. “Building credit has improved significantly and the process is much easier for newcomers.”

As a newcomer now, you can apply for an unsecured or secured credit card from a bank or other financial institution and immediately start building your credit history — remember, on-time payments are key. Now some quick definitions:

• Secured credit cards require you to post a security deposit equal to the card’s limit. The benefit is that even though the card is essentially pre-paid, credit bureaus treat it like a regular credit card and you can use it to build your credit history.
• Unsecured credit cards are the opposite. You borrow money, pay it back in monthly installments, and there’s no collateral, so you usually need average credit to apply. Of course, that lack-of-credit-thing can be an issue for newcomers.

3. The unfortunate truth: auto insurance is expensive for newcomers

Here’s the less optimistic news for your Canadian finances. Your driving history from your home country, no matter how many years long, may not count in Canada — and driving history is a huge factor in determining Canadian car insurance rates. So if your previous experience is void here, you’ll be starting at zero, and your premiums will be higher than you likely anticipated.

Getting a driver’s license won’t be cheap either. While you can use your original license for a short period of time, you’ll eventually have to get a valid Canadian license. The process will differ by province/territory, but you can find the details on the Citizenship and Immigration to Canada website. Just know this: you may have to complete all levels of a graduated licensing program, which means you’ll have to pay for all of the tests.

4. You’re not alone when it comes to your financial goals

You’re settling into a new country and a new life. It’s scary. Add in your money concerns and the unfamiliar financial industry, and it’s terrifying. But it helps to know how your goals stack up against other newcomers’. You might find that everyone’s on the same page. In fact, Cheung shared a few insights from Environics’ Financial Services Among New Canadians syndicated study, and here’s what they showed:

• For 78% of newcomers, their top financial priority is to be able to afford their everyday expenses

• 67% are saving for major purchases (other than a house or car)

• 64% are saving to buy a house

5. You have tech on your side — use it

You most likely already have the means for a smooth and smart financial transition. Thanks to tech and the internet, newcomers are savvier and more financially confident than they were in the past. According to an Environics 2016 survey of new Canadians’ financial habits, newcomers are actually feeling increasingly confident in their ability to make informed decisions about their finances — they have the power of Google search on their side.

Like all of us, newcomers want to get by first and afford the big things second. Fortunately, Canada has a competitive banking industry and an evolving FinTech scene, so today, more than ever before, newcomers have more information, more resources, and more options for achieving financial success. And we’re confident that’s exactly what you’ll do: succeed. All you need to do is keep learning.