Are you a new Canadian immigrant? How to set yourself up for financial success

In 2023, Canada’s population of non-permanent residents (NPRs) grew by more than half a million people, part of the steepest single-year rise in at least five decades of available data (Getty Images / mirsad sarajilic)

How to manage your finances as a new immigrant to Canada

Are you new to Canada? There’s a whole lot to take in. I know how much work it is, as my parents went through the same journey back in the 1980s.

In addition to learning cultural nuances or a new language, uprooting and moving to a new country also means that you’ll have to make new financial decisions.

Whether you’re figuring out where to bank, how to account for taxes, starting to invest, or learning about retirement plans, understanding the basics of how to manage your finance in Canada will help set you up for success.

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Below, I’ll offer some helpful and practical tips to get you started.

Banking basics

The first thing you’ll need to do as a new immigrant is set up a bank account with a Canadian bank. You’ll be able to open a chequing account, which allows you to use your debit card for daily spending, and a savings account, which lets you set money aside for savings.

There are many banks to choose from, but the “Big Five” are:

• Royal Bank of Canada (RBC)
• Toronto-Dominion Bank (TD Bank)
• Bank of Montreal (BMO)
• Canadian Imperial Bank of Commerce (CIBC)
• Bank of Nova Scotia (Scotiabank)

The upside of using one of these major banks is that you’ll find branches and ATMs available in almost every province and major city. However, the downside is that banking fees may be a bit higher compared to banking with a smaller, more local bank or credit union.

Documents you’ll need to open a bank account as an immigrant

To open a bank account, you’ll need to provide a few documents to verify your identity and legal status. According to Canada’s Financial Consumer Agency, the two most important documents required to open a bank account are:

• A legal document with your name and current address (such as a driver’s license)
• A document with your name and date of birth (such as a birth certificate)

As a new immigrant, you may also need to provide your passport or Visa documents. These requirements can vary from one bank to another, so it’s best to call ahead of your appointment to ensure you bring all of the correct documents.

Understanding the Canadian tax system

Canada has a progressive tax system, which means that you’ll pay more in taxes as your income increases. According to the Canada Revenue Agency (CRA), the federal tax starts at 15 per cent for individuals earning less than $55,867 and goes all the way up to 33 per cent for individuals earning more than $246,752.

You can see a full breakdown of the tax brackets on the CRA's official website.

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In addition to federal taxes, you’ll also be required to pay local provincial taxes. The deadline for filing the previous year’s tax return is April 30th. If you file later than this, you’ll be required to pay a late-filing fee.

While you can file your taxes for free through the CRA’s website, I recommend working with a professional tax preparer or accountant if it’s your first time. Not only will they ensure that your tax return is filed correctly, but they will also be able to help you apply for tax credits and refunds that you may be eligible for.

Retirement planning in Canada

The most popular retirement account in Canada is the Registered Retirement Savings Plan (RRSP). Many employers offer the ability to sign up for an employer-sponsored RRSP, and may also offer to match a percentage of your contributions to the retirement plan. Alternatively, you can open up your own RRSP with your bank.

Essentially, an RRSP allows you to contribute pre-tax income to a savings or investment account. Ideally, by the time you retire, the effects of compounding interest over time should leave you with a good nest egg to fund your retirement.

While your RRSP contributions are tax-deductible, you will be taxed on early withdrawals or once you begin withdrawing from the account after retirement.

Another great retirement planning tool is the Tax-Free Savings Account (TFSA), which can also be used as an investment vehicle to hold stocks, bonds, and other investments. Similar to RRSP accounts, most major banks offer TFSAs.

Contributions made to a TFSA are made post-tax, which means they can’t be used to reduce your tax liability. However, any profits realized in a TFSA account are not subject to tax, which allows your money to grow tax-free over time.

Both are good tools for retirement planning, and each account has its own unique benefits, which you can read more about here.

Final thoughts

Overall, the Canadian financial system is very well structured. Banks and employers are also required to follow strict regulations set by the CRA and the Financial Consumer Agency, which means that you can expect the same financial structure no matter where you are in Canada.

Christopher Liew is a CFA Charterholder and former financial advisor. He writes personal finance tips for thousands of daily Canadian readers at Blueprint Financial