Setting up your Financial Foundation: Essential Banking Tips for Newcomers

When you first arrive in Canada, you’ll have to manage to find a place to live, start a job and learn about your new community. It’s a lot to get organized. This guide offers simple guidance to help get your money matters in order so you can safely save, move and use your money, and start building a good credit score to help you meet your goals.

Open a Canadian bank account

Opening a bank account with a Canadian bank should be a top priority even if you have an account in another country because international banking can be complicated, time-consuming, and costly. A local bank account will give you a safe place to put your money while allowing easy access.

Here are few key features you should know about.

Chequing accounts

People use chequing accounts to hold their funds for monthly and everyday expenses and often ask their employers to deposit their paycheques directly into their chequing accounts.

Savings accounts

This account allows you to put in your extra money to build an emergency fund or save for a larger purchase. Keeping this money in a separate account from chequing is helpful so you don’t accidentally spend it.

Debit cards

You can access your chequing and savings accounts at a bank or use your debit card at an ATM. While this card looks similar to a credit card, you can use it to buy directly from some stores, it’s not credit. When you pay with debit, the money comes directly from your account.

Interac e-transfers

When you want to send money to someone with a Canadian bank account, you can use an Interac e-transfer. Find this service by logging into your mobile or web banking. It’s free with some bank accounts, while others charge a small fee for each transfer.

Pre-authorized debit

This is a useful feature for people who may forget to pay their bills on time. When you set up a pre-authorized debit, you give your bank permission to pay a certain amount to a certain account on a certain date. So, for example, you could set up a pre-authorized debit to pay your cellphone provider every month.

Note that different banks and accounts charge different fees. Ask if there’s a monthly fee and how much different transactions cost. Figure out which features you need and can afford, and research to find the best bank account for you.

Start building your credit score

A credit score is a rating that banks, other financial institutions, employers, and even landlords can ask to see before they lend you money, employ you, or rent to you. This three-digit number represents how well you’ve handled credit in the past, such as whether you pay your bills on time. The higher your credit score, the better.

The challenge for newcomers is that your financial history from other countries doesn’t count, so when you arrive you’re starting from the beginning.

There are many ways to start building your credit score, including opening a cellphone account, setting up your utilities like heat and internet, and responsibly using a credit card.

Invest in yourself

It’s worth learning about these government programs open to newcomers that can help you with your budget and invest in your future goals.

Registered Education Savings Plan (RESP)

The RESP is designed to let you save for a child’s post-secondary education so you can be ready to help them with their educational future. With this program, you may be eligible for extra monies from government grants to grow these savings faster.

Tax-Free Savings Account (TFSA)

The TFSA is an investment tool that lets you invest your money and any earnings are tax-free. Find out about TFSA contribution limits, types of investments, and withdrawal rules here.

Registered Retirement Savings Plan (RRSP)

As a newcomer to Canada, you are eligible to open an RRSP once you’ve filed an income tax return for the first time. An RRSP is an investment account to help you save for retirement and contributions are tax-deferred, meaning that you won’t pay tax on those deposits until you withdraw the money. Find out about RRSP limits and rules here.

First Home Savings Account (FHSA)

The First Home Savings Account, announced in 2023, is a tax-free account that lets you save up to $8,000 annually (to a $40,000 maximum) towards buying your first home. Similar to an RRSP, your contributions are subtracted from your annual income so they can reduce your tax bill, and like a TFSA, the money you withdraw is also tax-free. The funds must be used for a down payment (or they can be transferred to an RRSP).

These three areas — a Canadian bank account, establishing a credit history, and enrolling in the appropriate government programs and investments — are the basics of a strong financial foundation.

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