As a newcomer, your financial needs will be different from those of established Canadian residents who’ve lived here longer. For this reason, some of Canada’s largest banks, such as RBC, offer newcomer-specific products that are designed with the financial requirements of newcomers in mind.
During your first year in Canada, your financial needs may be limited, and you may not require all the financial products your bank or financial institution offers. However, as you settle into your new life, your financial requirements will likely expand to keep pace with your goals. In this article, we provide a financial checklist for newcomers to Canada so you’re well-versed with the financial products available to you, the purpose they serve, and when you might need them.
In this article:
Financial products to explore three months before arriving in Canada
Chequing account in Canada
What is a chequing account?
You’ll need a chequing account for your everyday transactions and purchases in Canada. This will be the first Canadian bank account you open and the one you’ll use most often. Your salary will get deposited into it, and you’ll pay your bills through this account. You typically don’t earn interest on funds kept in your chequing account.
Usually, there is no limit on the number of transactions you make with this account, but there is a monthly fee associated with with this account (it is sometimes waived if you fulfill certain criteria).
When to open a chequing account
Some banks, like RBC, allow eligible newcomers to start the account opening process before you arrive, so you can transfer funds to Canada beforehand. The pre-arrival account opening process can take up to two months, and you can book an appointment with an RBC Newcomer Advisor to initiate the process once you have a landing date.
|| Note: When you open a bank account pre-arrival, you can use the account opening documentation and the documents showing you’ve transferred money as proof of settlement funds at your port of entry in Canada. However, you can only access the funds in your account after you arrive in Canada.
What is travel insurance?
Travel insurance provides coverage for unexpected expenses when you travel to Canada, such as accidents, travel delays, lost baggage, and medical emergencies.
Unless you have provincial or private insurance, the out-of-pocket cost of healthcare can be high in Canada, and the small amount you pay for travel insurance can help you avoid a huge risk. It is especially important to get travel insurance if you’re moving to a province that has a waiting period for provincial health coverage.
When to get travel insurance for Canada?
Typically, your travel insurance should start from the day you leave your home country until the time your provincial health insurance begins. You can purchase travel insurance once you have a firm departure date and have booked your flight tickets. Be sure to check when you’ll be eligible for provincial health insurance coverage and when your coverage will start.
Banking products to get during your first week in Canada
What is a debit card?
A debit card is a payment card that typically comes with your chequing account. Transactions made through your debit card are equivalent to cash, as you can only use your debit card to spend money already in your bank account. Most Canadian debit cards cannot be used for online purchases (Canadians typically use credit cards for online payments), so check with your banking advisor if that will be the case with your card.
When to get a debit card
As a newcomer, you’ll likely be offered a debit card when you visit your bank branch to open or activate your chequing account. Usually, your debit card will be active when you receive it and can be used for transactions immediately. If you’re opening a new bank account virtually (over the phone or via video call), your debit card will be delivered to you through mail within three to five business days.
Canadian credit card
What is a credit card?
A credit card is a payment card, issued by a bank or financial institution, that allows you to make transactions on credit. When you use a credit card to make payments, you borrow funds from the bank and must repay them later. In Canada, credit card billing cycles typically range between 28 and 31 days, and most issuers offer a 21-day grace period during which you can repay funds borrowed during the previous billing cycle without being charged interest.
When to get a credit card in Canada
Ideally, you should apply for a credit card as soon as your chequing account is activated. It can take a week or two for your credit card to be delivered by mail.
Your credit history is your financial reputation in Canada. So, as a newcomer, building your Canadian credit history from scratch should be an important financial priority. It helps lenders understand your creditworthiness, or the risk they take while lending money to you. Your credit history in Canada only begins once you take credit and start repaying it. Getting and using a credit card is the first step in that direction.
It’s important to note that newcomers may not be eligible for all types of credit cards when they first arrive in Canada. However, some large banks, such as RBC, offer specially designed newcomer credit cards that you may qualify for without an existing Canadian credit history.
What is a savings account?
A savings account is a low-interest bank account that can help you save money for short-term goals. Savings accounts usually don’t have fees attached to them. However, they do usually have a limit on how many transactions you can make each month, and if you exceed that monthly limit, you may incur penalties.
The money you put in a savings account is not locked in, and you can withdraw it at any time. However, some Canadian savings accounts offer extra interest if you keep funds in the account for a certain minimum premium period.
When to open a savings account in Canada
As a newcomer to Canada, it’s a good idea to set some funds aside for emergencies or short-term goals. If you want to put some of the money you’re bringing from your home country into savings, you can open a savings account as soon as you arrive. Alternatively, you can wait until you get a job in Canada and then systematically save a portion of your monthly income. Be sure to keep enough money to cover your monthly living expenses in your chequing account so you don’t need to move money back and forth between accounts.
Financial products for your first six months in Canada
What is tenant insurance?
Tenant insurance (also called renter’s insurance) is a type of insurance product you can purchase to protect both you and the landlord from unforeseen events such as accidental damage to the rental property, theft, and more. You’ll need to pay a monthly premium for the duration of your lease.
When to get tenant insurance
Many landlords require tenants to purchase tenant insurance before they sign a lease agreement or move into a rented home. However, you likely won’t need renter’s insurance for any temporary accommodation (such as a hostel, hotel, or Airbnb) you’ve booked for your first weeks or months in Canada.
Private health insurance
What is private health insurance?
This is an add-on or supplementary insurance to cover medical expenses not included under your provincial or territorial health insurance plan, such as vision and dental care and prescription medication. Many Canadians also purchase accident coverage which supplements your income if you’re in an accident that impacts your ability to work. Unlike travel insurance which only covers emergency care, private health insurance provides comprehensive coverage, over and above what your provincial health plan offers.
When to get private health insurance
Health care, including vision and dental care, can be very expensive in Canada unless you’re covered by insurance. You should purchase private health insurance after carefully reviewing the coverage details of your provincial health plan, to minimize your out-of-pocket health spending.
In some provinces, like Ontario and Manitoba, international students are not covered by provincial health plans. Read our article to learn more about health insurance for international students in Canada.
|| Tip: While looking for your first job in Canada, check if your future employer provides group health insurance as part of their employee benefits package. You may be able to adjust your private health insurance to increase or reduce coverage after purchasing a policy.
Saving for your goals during the first six months in Canada
Once you find suitable employment in Canada, it’s a good idea to explore savings products and begin setting aside some money for the future.
It’s never too early to start saving for retirement. As a resident of Canada, you may be eligible for social assistance or a retirement pension in your old age. However, the amount you receive likely won’t be enough to cover your living expenses during retirement, and you’ll need to supplement this income with your personal savings. Plus, if you have kids, you may want to start saving for their post-secondary education. Here are some savings plans you should consider during your first six months in Canada:
Tax-Free Savings Account (TFSA)
What is a TFSA?
A Tax-Free Savings Account is a registered savings account that allows Canadian residents to grow their savings tax-free. There is an annual limit to how much you can put in your TFSA, but the contribution room is cumulative and any leftover room will be added to your contribution limit for the following year.
You can invest funds in your TFSA in various products, such as Guaranteed Investment Certificates (GICs), stocks, ETFs, mutual funds, and bonds, or keep the funds as cash. Any returns you earn on your investments, including interest, dividends, and capital gains, are non-taxable.
When to open a TFSA
As a new permanent resident of Canada, you can open a Tax-Free Savings Account with a bank or financial institution at any time after your arrival, provided you are over the age of 18 and have a Social Insurance Number (SIN). You do not need a job or a Canadian source of income to be eligible for a TFSA. In fact, many newcomers invest savings they brought from their home country in their TFSAs.
If you don’t have any funds to set aside during your initial months in Canada, don’t worry. As a newcomer, your contribution room starts accumulating from the year you become a Canadian resident, even if you don’t immediately open a TFSA.
First Home Savings Account (FHSA)
What is an FHSA?
A First Home Savings Account is a registered account that can help Canadian residents, including newcomers, invest and grow their money, with the goal of purchasing their first home in Canada. Your FHSA will have an annual contribution limit of $8,000 and a lifetime contribution limit of $40,000, and all your contributions will be tax-deductible. Moreover, any withdrawals (including your contributions and returns earned) will be tax-free, provided you use the funds to purchase your first home.
When to open an FHSA
If you plan to buy or build a home in Canada after a few years of renting, you may be eligible to open a First Home Savings Account soon after you arrive in Canada as a permanent resident. Temporary residents, such as work permit holders and study permit holders, must first meet the physical presence requirement for tax residency in Canada.
Unlike the TFSA, your FHSA contribution room only starts adding up from the year you open an FHSA account. Moreover, only up to $8,000 of unused contribution room can be rolled over to the following year. For more information, read our article on what newcomers should know about the First Home Savings Account.
Registered Education Savings Plan (RESP)
What is an RESP?
The Registered Education Savings Plan is a registered account that can help you save for your children’s post-secondary education (or even your own). The individual who opens the RESP and contributes to it is called the subscriber, and the child (or adult) whose education the RESP will fund is known as the beneficiary.
Like with a TFSA or FHSA, you can hold various types of investments in an RESP. Withdrawals from the account are taxable to the beneficiary. RESPs have a lifetime contribution limit of $50,000, and the Government of Canada partially matches your annual RESP contributions (up to a lifetime maximum of $7,200 per child).
When to open an RESP
If you’re a permanent resident moving to Canada with children, the sooner you open an RESP and start saving for their education, the better. There’s no annual contribution limit, so even small contributions can quickly add up, especially if you invest the funds wisely. To open an RESP, both you and the beneficiary must have Social Insurance Numbers (SIN).
Financial products newcomers may need during their first year in Canada
Car loan or lease
What is a car loan or lease?
Car loans and leases are two automobile financing options available in Canada. A car loan allows you to purchase a vehicle by putting forward a down payment and repaying the remaining cost in installments, with interest.
Leasing a vehicle is a popular option in Canada. Although you’ll still pay a down payment and installments (with interest), a lease is different from a purchase. When you lease a car, you don’t own it but only borrow it for the duration of your lease. You must return the vehicle in good working condition when the lease ends. The terms of a lease may be different from that of a loan, but leasing is usually the cheaper option. However, since you won’t own the asset (car), you won’t benefit from its resale value.
When to get a car lease or loan
As you settle into your new life in Canada, you may want to purchase or lease a car to make getting around the city easier. In Canada, you must have a valid driver’s license to drive a vehicle, so you should only consider purchasing or leasing a car once you have a license.
Whether you’re looking for a new or used car, you can get a loan or lease from a financial institution. Some car dealerships partner with a specific banking institution, and their customers must get a loan or lease from that financial institution. Other dealers may allow you to work with whichever bank you prefer. You can also get a loan to purchase a used car from an individual.
|| Tip: Since loans and leases are credit products, financial institutions will run a credit check before issuing one to you. If possible, try to get quotes from multiple lenders within a week so all the inquiries count as a single credit check. On the positive side, having a variety of credit products can positively impact your credit score in the long run, provided you repay the loan or lease on time.
What is auto insurance?
In Canada, it’s illegal to drive an uninsured vehicle. There are several different types of auto insurance, and not all of them are mandatory.
- Liability coverage is mandatory for all motor vehicles in Canada. Liability coverage helps cover your legal expenses if you’re at fault in an accident, as well as any damage caused to another person, their vehicle, or property.
- Collision coverage is optional but good to have. It covers the cost of repairs if your vehicle is damaged in an accident.
- Comprehensive coverage is optional auto insurance that protects you against non-collision-related losses, such as your car getting keyed, broken into, damaged by weather, and more.
When to get auto insurance
When you’re buying or leasing a vehicle, you will need to purchase auto insurance (at least liability coverage) before taking delivery of the vehicle, usually before it leaves the dealership or is handed over to you. Your insurance must be valid from the day you take ownership of the vehicle or when your lease begins. You can purchase auto insurance from banks, such as RBC, or through some other financial institutions.
International money transfers
What is an international money transfer (IMT)?
This service allows you to send money to recepients in other countries in their local currency. Typically, with an international money transfer, the funds are withdrawn directly from your bank account and remitted to the recepient’s foreign bank.
Most banks charge fees for IMTs, depending on the amount being transferred. However, some banks, like RBC, offer several free international money transfers with eligible RBC Newcomer Accounts for the first two years.
When to use international money transfers
As a newcomer to Canada, you may want to send money to your family back home to support them financially or to as an occasional gift. You can contact your bank or log into your online banking portal to initiate an international money transfer, as needed.
Other savings products for your first year in Canada
As a newcomer, you may want to ensure your long-term financial stability in Canada and save for some of your goals, whether that’s an emergency fund, a vacation, or a new car. You may want to put some of your savings to work by investing in financial products that yield higher returns.
Once you have a job in Canada and a stable income, it’s time to take another look at your budget and make sure that you’re setting enough money aside each month. Regardless of what your financial goals are, there’s a wide range of products available to help you grow your money in Canada. If you’re unsure about which ones are right for you, a financial advisor or wealth management advisor can help you manage your finances more effectively.
High-Interest Savings Account (HISA)
Some banks and financial institutions offer High-Interest Savings Accounts that offer a higher rate of interest on your savings compared to regular savings accounts. The interest rates may vary depending on how much you’re saving and for how long.
HISAs can be a good way to set money aside for short- to mid-term goals. It is a low-risk product as your funds are insured by the Canada Deposit Insurance Corporation (CDIC). Typically, HISAs don’t have any monthly fees or minimum balance requirements, but that may vary by financial institution. These funds are usually not locked-in, but some High-Interest Savings Accounts may limit the number or amount of withdrawals you can make in a month.
Guaranteed Investment Certificates (GIC)
GICs are an attractive savings option as they offer a higher rate of interest with no risk. There are a few different