Banking may be a little different in Canada than in your home country. So, understanding the financial system in your new country is one of the many first steps you will take as a newcomer. With a little information and preparation, you can feel confident in your financial journey.
If you are at the starting point on this path, here are four steps to guide you along the way.
Step #1: Do your research
Newcomer Bimal S. Kumar, a tech professional who settled in Kitchener, Ontario, four years ago, had many questions about dealing with his finances. “The process of opening a bank account is quite straightforward and the offerings of all institutions are relatively straightforward, too,” Kumar says. “But after opening my account, I had a lot of questions that I was not able to get answers to. Financial education is often missing in Canadian banks, so I did a lot of self-learning.”
If you have questions like Kumar, doing some research before you walk into a financial institution is an important first step. Start with some initial research online, including on the websites of the different financial institutions in your area. Compare what different banks or credit unions have to offer, from types of accounts, to interest rates and other special offers.
These days, many financial institutions have newcomer assistance programs and offers designed to attract your business. These could include special rebates, incentives and perks for opening an account or applying for a credit card at their institution.
Step #2: Consider what accounts you need
Part of this research is also taking the time to understand your own banking needs and priorities. So, in this second step along your financial pathway, consider what type and how many bank accounts you want.
Chequing and savings accounts are the two most common types of personal bank accounts in Canada. A chequing account is best for everyday banking transactions, like receiving payroll deposits, paying bills, making purchases, depositing and withdrawing money, and performing online transactions. They are designed for convenience, but don’t usually earn much interest.
A savings account is for storing money you would like to hold securely for longer and earn a better interest rate. It’s a good place to put money aside from each paycheque to save for larger purchases, investing in your education, professional development or for an emergency.
If you’re married or have a significant other, you may also want to consider if you want any joint accounts for shared bills.
After you make an appointment with the bank or credit union of your choice, your advisor can give you more details on what their accounts have to offer in terms of fees, interest rates and other features. Don’t be afraid to shop around between different financial institutions to see who has the best interest rate offerings and lowest fees!
Step #3: Next step, consider credit
When selecting your first bank in Canada, consider what else they offer beyond the account basics. While you may not be ready to think of things like credit cards, investments and loans, you should at least ask what your chosen bank has to offer.
It wasn’t that long ago that newcomers in Canada struggled with getting approved for credit cards and mortgages. Today, with immigration numbers as high as they are, banks are marketing to attract newcomers. So, even if you don’t need a credit card or a loan right away, compare what different banks are offering particularly around credit card limits and interest rates.
If you don’t have a credit history in Canada, it can still be difficult to get a loan from a traditional bank or financial institution. Consider alternatives like microlending organizations that focus exclusively on immigrants and refugees such as Windmill Microlending. This Canadian charity offers microloans to newcomers totalling up to $15,000 and these can be used to pay for the costs of accreditation, training or career development courses.
Learn more about building credit history and how credit can help you achieve your long-term goals in Canada in our upcoming article in March!
Step #4: Know your rights
Finally, once you select a bank and open your accounts, know that you are entering into an agreement with the bank and hence have certain rights. These rights are aimed at protecting your interests and ensuring that you are not subject to any false or misleading information. The bank must also receive your consent for any electronic communication and communicate with you in a clear, transparent and simple manner, especially about the introduction of any new charges or fees.
The bottom line
These four steps will help you start your financial pathway to prosperity on the right foot. Have more questions? Reach out to other newcomers whose footsteps you’re following.
“It is always a good idea to have a conversation about finances with other newcomers who have been through this journey,” advises Kumar. “I feel that as newcomers we talk about everything else — shopping, food, lifestyle — but we don’t talk about finances. Talking to others, speaking with a financial advisor, and attending seminars and workshops are some ways to enhance your financial knowledge.”