Many newcomers move to Canada with aspirations of not just securing their own financial future but also being able to financially support their family back home. However, during your first few years of settling down in Canada, it can be hard to balance your personal savings goals with sending money to your home country.
This article will provide you with some tips on saving for your future while supporting your family back home, so you can thrive in Canada while fulfilling your family responsibilities.
In this article:
- Make a personal budget
- Understand your savings goals
- Set the right expectations (for yourself and your family)
- Add new income sources
- Invest wisely to grow your savings
- Save on international money transfers
All savings plans start with budgeting. A budget can help you get a clear picture of your income, expenses, and savings. If you plan to financially support your family in your home country, set aside the amount you intend to send home in your monthly budget. Use Arrive’s cost of living calculator to estimate and plan for your monthly living expenses in Canada.
As a newcomer in Canada, you may still be in the process of finding a well-paying job or establishing yourself financially. In such cases, it is a good practice to pay yourself first so you can cover your expenses without feeling a financial crunch. You may also want to set up automatic transfers to set aside money for investments.
Typically, in Canada, your rent or monthly mortgage will be your biggest expense, followed by groceries, transportation, utilities, and other costs. List down all your expenses for a few months to identify if you’re spending too much and where there might be room to cut down on unnecessary expenses. As far as possible, try to stick to the budget you make and revisit your budget every few months to make adjustments.
Without proper planning, it can be difficult to find a balance between saving for your future in Canada and sending money to your family back home. The first thing you’ll need to do is to get a better understanding of your saving goals.
Whether you want to buy a home in Canada, save for your children’s education, or your retirement, be sure to establish clear, time-bound savings goals. Don’t forget to include your short-term goals, such as setting up an emergency fund, buying a car, or saving for a wedding or a vacation.
Make sure your savings goals align with your budget to get a realistic picture of how much you can save in a 1-year, 5-year, 10-year, and 20-year time period. This will help you understand how much of your income you’ll need to set aside for your future and how much you can spare to send back home.
If you fall short, don’t worry. Remember, you can always grow your savings through investments and that your savings may increase as your income grows. Speak to a financial advisor to get advice on financial goal-setting for your specific situation.
Whether sending money home is a cultural expectation or something you need to do to help your family cover expenses, it’s important to set realistic expectations for both you and your family.
Start by estimating how much money you can afford to send home based on your income and expenses. You can also assess your family’s income and requirements to get an idea of how much you’ll need to supplement. In the initial months following your arrival in Canada, when you’re still looking for a job, it may be challenging to set aside money to send. If the funds you send are needed to cover expenses back home, it may be best to leave some of your savings in your home country, so you don’t have to worry about your family’s financial security during your first few months in a new country.
Once you’ve found a job in Canada, be sure to set the right expectations for your family by having an open conversation about your income, expenses, and tax obligations. You can jointly agree on a sum that works for both you and your family, keeping your savings goals in mind, and revisit it whenever your income changes. If you’re still struggling to meet expenses or savings goals, see if you can send home bonuses or incentive amounts instead of a fixed monthly sum.
Setting clear expectations for yourself is just as important. It might not always be easy to send money back home, especially when you’re still new in Canada. Don’t look at others in your community or in your friend circle as a benchmark: everyone has a different financial reality. If you’re unable to contribute to your family’s finances during your initial months, don’t feel guilty. Remember that your family wants you to have a comfortable life in Canada, and establishing a secure financial future for yourself today will allow you to take better care of your family back home in the future.
As a newcomer, it may take some time to find a job in your field or at your experience level. Many newcomers opt for survival jobs or part-time work to cover their expenses until they land a suitable job in their industry. Even after you’ve found a permanent job, it is possible that your income may only be enough to cover expenses and you may not have enough left over to send money back home.
A lot of newcomers in Canada rely on multiple income streams to enhance their earnings. A side gig could be in the form of a part-time job, freelance work, or starting your own business. Before committing yourself to a side gig, make sure that you have enough time left over for your primary job. You can also explore options like subletting or renting a spare room in your home to create a new income source.
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When saving for your future in Canada, you have several savings and investment options available to help you grow your money. You can choose one or more based on the amount you want to invest, when you’ll need it, the return you expect, and the risk you’re willing to take. Some of these options include:
- High Interest Savings Accounts (HISA): Some financial institutions like RBC offer high interest savings accounts where you can earn more interest than you would in a regular savings account.
- Tax-Free Savings Accounts (TFSA): TFSA is a registered savings plan that allows you to keep your savings as cash or invest in stocks, mutual funds, bonds, or GICs (Guaranteed Investment Certificates). Withdrawals from your TFSA, including investment income, are tax free, making it an attractive savings option. The contribution limit for TFSA is revised by the government each year, and any unused contributions are carried over to the next year.
- Registered Retirement Savings Plan (RRSP): The RRSP is a tax-deferred registered savings plan where your contributions are tax deductible. Your annual contribution limit is typically 18 per cent of your taxable income from the previous year, up to a preset maximum. There are restrictions on pre-retirement withdrawals from your RRSP, but there are provisions that allow you to borrow (and then repay) money from this plan, such as for a down payment on your first home.
- Registered Education Savings Plan (RESP): If you have children, an RESP is a great way to save money for their education. Parents (or other subscribers) can open an RESP for a beneficiary child. The contributions you make are supplemented with government grants, and withdrawals are considered taxable income for the beneficiary.
- Guaranteed Investment Certificates (GICs): A GIC is a low- to no-risk financial product offered by several Canadian financial institutions. The institution guarantees your principal amount and offers a fixed or variable rate of interest based on the product you choose. Typically, with a GIC, your money is locked-in for a pre-decided period and the interest rate is in proportion to the selected period.
- Bonds: Bonds are fixed-income investments typically issued by the government or some companies. This type of investment provides you with interest for a fixed period and then repays your initial investment upon maturity.
If you have a higher risk appetite and are looking for a higher rate of return on your investment, you can also choose to put your money in stocks, mutual funds, or Exchange Traded Funds (ETFs).
Some of these savings and investment options may or may not be suited to your specific situation. Speak with a Financial Advisor who understands your situation to determine the best financial course of action for you.
Your budget and savings goals should give you a good idea of how much you can set aside in a particular year. Use that estimate to set up automatic monthly transfers from your account. To reach your savings goals quicker, you can also invest bonuses, income from other sources or pay hikes, and any tax refunds you receive.
If you’re planning to send money back home regularly, you can also save some money by picking the right international money transfer channel. In Canada, you can send international money transfers through banks, credit unions, money transfer services like Western Union, P2P transfer services like Instarem and Wise, or through some currency exchange businesses.
Some of the factors you should keep in mind while deciding on an international remittance partner are trustworthiness, currency exchange rates, transfer speed, and any offers or incentives they may have for newcomers.
| Tip: Newcomers with an eligible RBC banking account are eligible for up to 24 free international money transfers in their first year.
For many newcomers in Canada, sending money to family back home is either a cultural obligation or a means of supplementing their family’s income to cover expenses in their home country. However, it is important that you account for your own future and savings goals while calculating how much you can afford to send back home. By setting clear expectations for yourself and your family and creating a proper budget, you can take care of your family while also building a financial cushion for yourself in Canada.