How to manage your finances as a newcomer couple in Canada

As a newcomer couple to Canada, you’ll make many important decisions together as you settle into your new life. While it’s not always easy to agree on every issue, one area of particular importance is how you manage your finances together. This is especially key in your initial years in Canada, when one or both of you may still be looking for suitable jobs in your field, or when your incomes are significantly different.

Making joint financial decisions will help you better plan your savings and investments, balance your contributions to household expenses, and realize your dream of a brighter future in Canada. In this article, we provide tips on managing your finances as a newcomer couple in Canada, including how to save money, manage expenses, file taxes, and manage day-to-day finances.

In this article:

• Five ways to share income and expenses as a newcomer couple
• Saving for your future as a couple
• Financial considerations for newcomer parents
• Managing your taxes as a couple in Canada
• Tips on managing your finances as a newcomer couple

Five ways to share income and expenses as a newcomer couple

As you embark on a new life together in Canada, you’ll likely take on new financial challenges. From incurring big expenditures like buying a car to deciding on whether to rent or buy a home, one of the first things you’ll need to do as a couple is structure your finances to ease your day-to-day financial decisions. Here are several common ways couples jointly manage their income and expenses. 

Combine all income into one account

In this arrangement, couples share one chequing account into which they deposit both incomes. Every expense is paid out of this account—from household purchases, such as a new appliance to personal spending, such as haircuts.  

Many newcomers choose this option if one partner is still looking for their first job or has a much lower income. This single account arrangement can be challenging if one partner is more cost-conscious than the other or if you don’t agree on what the acceptable costs for common expenses should be. For this style of shared finances, it’s important to regularly update your budget and discuss upcoming expenses. 

A shared account for household expenses only

In this scenario, a newcomer couple opens a joint chequing account to cover shared expenses, in addition to their own individual accounts for discretionary spending and personal savings.  

One way to do this is to deposit both incomes into the joint bank account, from which you individually withdraw an agreed upon amount for personal spending. Alternatively, you can have your incomes deposited into individual accounts, and then transfer a specified amount into the shared chequing account from which shared expenses such as groceries, rent or mortgage, and childcare are paid.

With this option, you’ll have to determine, in advance, how much income is reserved for expenses, and how much is for personal spending––will it be the same amount for both of you, or will it be proportional to your incomes? You’ll also have to decide which expenses fall under discretionary versus shared expenses.

Separate accounts

For couples who value financial independence, keeping separate accounts may be the ideal arrangement. In this case, each of you opens your own bank account to deposit your income and pay expenses. You are each responsible for your own savings and investments. Before choosing this scenario, you need to determine who will be responsible for which expenses, to ensure they’re all paid fully and on time. 

Separate accounts can be beneficial for couples who have different spending habits because neither partner is required to explain their personal purchases. However, it can also be challenging to fairly divide household expenditures, particularly if one partner earns significantly more than the other. The division may have to be reviewed regularly as expenses evolve and fluctuate, due to lifestyle changes such as a new home or starting a family.

Split expenses

In this scenario, all household expenses are split evenly, requiring minimal ongoing discussion on who pays how much, and when. When a bill comes in, you each contribute your portion to a joint account from which the payment is withdrawn. Alternatively, you can elect to take turns paying monthly bills and regular shared expenses, like groceries.

Apps such as Splitwise conveniently organize your shared expenses and keep track of what each has paid and still owes. Both partners maintain financial independence and control over how to spend their “leftover” money. However if one partner has a much higher income, this arrangement could put more financial strain on the lower income earner, as well as limit what you can afford to buy jointly.

One income covers all expenses

In situations where only one partner has a job, while the other is still looking for employment, you may have to live off one income for a while. Some couples also have aggressive savings goals, such as buying a house or saving for their kids’ education, and choose to use one income to cover their expenses, while saving the other fully. 

In this scenario, one partner’s paycheque covers all expenses. This can work well when one partner earns significantly more than the other and living within its means is manageable. However, since it may require frugality and financial discipline, it’s important both partners fully endorse this plan.

Saving for your future in Canada as a couple

As a newcomer couple, you’ve likely set goals you wish to achieve in the coming months and years as you settle into your new life. Many of these goals are connected to financial means – such as sending money to family back home, or putting a down payment on a house. Coming up with a savings or investment strategy is essential to achieving them. Here are a few savings plans available to help you reach your short-term and long-term savings goals.

Savings account

A savings account is very easy to set up. It also typically pays higher interest on your balance than a chequing account and is readily available for use, making it ideal for short-term savings goals, such as creating an emergency fund or unexpected car repairs. One of the simplest ways to grow your money as a couple is to open a joint savings account and set up either bi-weekly or monthly automatic transfers from your individual or joint chequing accounts.

Open a Tax Free Savings Account (TFSA)

A Tax-free Savings Account (TFSA) is a savings account registered with the Government of Canada that can be opened through any financial institution. While there is a limit to how much you can contribute annually to your TFSA, the real benefit is that you’re not taxed on your earnings or when you withdraw funds from it. Funds in a TFSA can be invested in stocks, mutual funds, and more, thereby offering more earning potential than a regular savings account. A financial advisor can help with these decisions.

Only the registered account holder can contribute to, withdraw from, or direct how the funds in their TFSA are invested. This means that if the TFSA is registered in your name, your partner cannot add to it, however they can give you money to add to it, as long as you have contribution room. As a newcomer couple, this is a great way to maximize contributions in both your TFSAs and earn greater returns, even if one partner has a lower income. 

Start a Registered Retirement Savings Plan (RRSP)

A Registered Retirement Savings Plan (RRSP) is a savings plan registered with the federal government to help you reach your retirement goals. It’s an ideal way to save over the long term because you don’t pay tax on earnings until you withdraw funds. Moreover, you can withdraw up to $35,000 CAD tax-free from your RRSP to buy your first home in Canada and repay the amount over 15 years.

As a newcomer couple, you can each open your own RRSP account through a financial institution once you file your first income tax return in Canada. You can then add funds, up to your annual contribution limit, and invest them in a variety of investment products. 

If one partner earns a higher income, they can use their contribution room to contribute to a Spousal RRSP. This will help ensure that both partners have a similar income at retirement. Since money in your RRSP is taxable upon withdrawal, the smaller your withdrawals are, the lower your tax liability will be. A Spousal RRSP can help balance each partner’s income and tax rate at retirement. 

Financial considerations for newcomer parents in Canada

For newcomer couples who have children or plan to have a child in Canada, the government offers financial benefits to help with the costs of raising them.

Canada Child Benefit (CCB)

The Canada Child Benefit (CCB) is a tax-free monthly payment provided by the Government of Canada to eligible parents of children under the age of 18. You receive a financial benefit for each child, which is calculated based on the number of children in your care, their ages, your marital status, and family income. As newcomer parents, you can apply for the CCB when you arrive in Canada. New parents can apply soon as the baby is born.

The parent who is primarily responsible for the child’s upbringing should apply for CCB. Typically, this is presumed to be the female parent, however if the situation is different in your household, the other parent should apply with a signed letter from the female parent stating that they are responsible for the care of the child. The amount you receive does not depend on which parent applies.

Parental Leave Benefits

If you are planning to have a child in Canada, you may be eligible for maternity and parental benefits provided by the Government of Canada if you take time off work to care for your newborn. While maternity benefits (15 weeks) are provided exclusively to the mother (to recover from childbirth), parental benefits are available for both parents over the course of 35 weeks (standard) or 61 weeks (extended).

As a couple, you’ll need to decide which parental benefit to take (standard or extended) as well as how to share your time off. You may want to consider what makes the most financial sense for your situation since the benefit is calculated based on income up to a maximum amount. How you divide parental leave can have a significant impact on your combined income, and it may make more financial sense for the parent with lower income to take a longer leave.

Registered Education Savings Plan (RESP)

Paying for your children’s post-secondary education is a costly expense. In Canada, you can begin saving for your child’s future education by opening a Registered Education Savings Plan (RESP). The two greatest benefits to an RESP are that the earnings are tax-free and the Government of Canada deposits a grant equal to 20 percent of the contribution you make into the account (up to a maximum), each year until the year your child turns 18. 

You can withdraw these funds when your child begins post-secondary education to cover tuition and cost of living expenses during their studies. As a newcomer couple, you may want to consider how you’ll share the RESP contribution expense and the frequency of your contributions.

Managing your taxes as a couple in Canada

You’re required to file a tax return in Canada every year, but there are ways to maximize tax benefits as a married or common-law couple. 

Spousal tax credit

As a newcomer couple, it’s possible that one partner’s income for the year is less than Canada’s Basic Personal Amount (BPA) and the other partner supports them financially for that period. In such a case, when you file taxes, the higher earning partner who financially supported the other may be entitled to a spousal tax credit. The BPA is a tax credit that can be claimed by all individuals to reduce the amount of federal tax owed that year. In 2022, the BPA is $14,398 and in 2023, it will be $15,000. 

Pooled medical expenses

As a couple, you can combine all eligible medical expenses you paid (and that were not reimbursed) for yourself, your spouse, or your child when you file your tax return. For a bigger tax credit, the partner with the lower income should claim these expenses since the credit is calculated as a percentage of income.

Splitting your pension income

This tax benefit is available once you or your partner begin receiving a pension income (typically after age 65). It enables one of you to allocate up to half your pension income to the partner who has a lower income and will therefore be taxed at a lower rate.  

Tips on managing your finances as a newcomer couple in Canada

When you arrive in Canada as a couple, your financial circumstances may be quite different from what they were in your home country. It’s not unusual for one or both of you to be looking for employment, or perhaps one of you will opt for higher education or skill training. Whatever your situation, talking openly about your financial concerns and goals will help you build the future you envision as a couple. 

Here are some tips to help you effectively manage your finances as a couple, no matter what challenges you face.

Share your combined net worth

A good place to start in financial discussions is to define what you own (assets) and what debts (liabilities) you owe. As your financial situations evolve, you may want to revisit this regularly to adjust your strategy so you remain on track for your longer term goals. 

With a clear picture of your net worth, it can be easier to prioritize your financial goals such as paying down debt, saving money, or purchasing an asset, like a house. For instance, if one partner is still paying down student loans, looking at your overall financial position and building a joint strategy to repay high-interest debt will help you save money in the long run.

Compare your approaches toward money

If you haven’t previously discussed how each of you approach finances, now is an ideal time to have a frank conversation as you plan your future in Canada. As a newcomer couple, you’ll face many decisions that relate to finances – from how much to pay to rent a house to choosing between public transit or buying a car.

While some choices will be easy to agree on, others may be challenging, especially if you have contrasting views on money or if one partner is still looking for a job and doesn’t have stable income. An honest discussion about how each of you spend and save money can help ensure you are both fully supporting and contributing to your goals.

Supporting family back home

Many newcomers move to Canada with plans to support their family back home and it’s important to include this in your early financial discussions. If one or both of you plan to send money to your home country, share your perspectives on what is an appropriate amount to send, how often, and the best way to transfer money internationally. 

Be sure to keep your joint financial priorities in Canada in mind, as well as your savings plan for the future. If you’re unable to set aside as much as you’d hoped to send to your families, you can always revisit this topic in the future, or set a financial goal that signals you can afford to start or increase your payments to family.

Identify your financial goals

Many newcomers move to Canada in search of greater opportunities for themselves and their children that are often tied to financial goals. To identify your financial goals, consider shared, as well as individual, aspirations to form a financial strategy to achieve them. While you may agree on the need to buy a home and a car, you may differ on how much you’re willing to spend or the timelines for obtaining them. 

This is also an ideal time to discuss your comfort level with taking on debt. Big expenses often incur new debt, so make sure your partner is comfortable in sharing the responsibility of paying it off. For instance, if one partner hopes to study in Canada to improve their employability, you may want to think about the implications of a reduced family income during their study period or the cost of borrowing for a student loan.

Build your credit history

Financial institutions look at your credit history to decide if they will lend you money, as well as how much interest to charge on your borrowed funds. As a newcomer to Canada, you will probably not yet have an established credit history. 

A simple way to build credit history is by obtaining a Canadian credit card and making regular payments on it. You can get a joint credit card or individual credit cards. A joint credit card can be convenient for couples who share all expenses and appreciate full transparency in how money is spent. The potential downside is that if one overspends, both of you are accountable for paying the balance and both your credit histories will be impacted if payments are missed.

Alternatively, you can get a credit card in one name only and add the other as an authorized user. In this instance, both of you can use the card, but any purchases the additional user makes won’t help build that user’s credit history. If you plan to jointly make a large purchase down the line, it’s ideal for both partners to have a good credit score, so make sure you build both your credit histories in parallel.

Start a joint emergency fund 

An emergency fund is money that’s set aside to be used during times of financial hardship or to cover unforeseen expenses such as loss of income or sudden home or car repairs. This money should be accessible at any time without penalty, such as in a savings account or TFSA.  As a couple, you will want to discuss if one or both of you should contribute to your emergency fund, how much, and how often. 

Find an ideal way to manage your finances as couple

Your family’s financial success will likely be a top priority during your initial years of settling down as a newcomer in Canada. As a couple, you’ll need to find the ideal way to manage your finances such that both partners can contribute without feeling pressured or strained. Defining your ideas around financial success and how to reach your shared goals together will make your newcomer journey easier.