Four strategies for reaching long-term savings goals as a newcomer in Canada

Credit to Author: Guest Author| Date: Wed, 03 May 2023 14:50:16 +0000

For most newcomers to Canada, building your new life in your new country is focused on present-day questions and challenges. What job will I find? Will I find a rental I can afford? How will I pay my bills? It’s difficult to plan for your long-term financial future when you’re so overwhelmed with building your life for today.

Romanian-born Gabriela Medar, a career practitioner based in Metro Vancouver and author of 10 Steps to Find Work and Be Successful in Canada: A Guide for Immigrants Who Want to Thrive in a New Culture, remembers how challenging it was planning for her financial future after first immigrating.

“Saving for your long-term future takes time and patience,” says Medar. “As a new immigrant, navigating the financial system can be challenging, especially, without a strong understanding of taxes, investments and retirement savings plans in Canada. I had to learn about these things on my own, which can be overwhelming and confusing.”

This is made even more difficult in a time of record rental prices, in most Canadian cities, and rising costs of living.

Based on her experience, Medar realized that having no credit history as a newcomer was one of the biggest obstacles to working toward her future financial dreams. “Because I didn’t have a credit history when I first arrived, it was difficult for me to obtain credit cards, loans or a mortgage. This made it hard to make large purchases or invest in my long-term financial goals.”

Read our story on “Building your credit history for your financial future.”

Despite the obstacles newcomers face in establishing their initial financial footing in Canada, it’s important to make the effort to look ahead at building long-term financial wellbeing for you and your family.

In addition to previous tips discussed throughout The New Canadian’s Financial Pathway to Prosperity around budgeting and savings, here are four strategies to help you further build your pathway to financial prosperity for the long term.

Strategy #1: Open tax-advantaged savings accounts

In addition to putting money aside in basic savings accounts, Canada has some tax-advantaged savings accounts that will help you save for the long term. For starters, a tax-free savings account (TFSA) is a tax-advantaged savings account that allows you to save and invest the money in the account without paying taxes on those investments.

Also, a registered retirement savings plan (RRSP) is an investment account used to save for your retirement. Contributions are tax-deductible and investment earnings are tax-deferred until you take them out. The earlier you start saving for retirement — even if you can only afford a small amount each month —  the more time your money has to grow.

Saving for your child’s future education? A registered education savings plan (RESP) is a long-term investment tool for saving for your children’s post-secondary education. Investments grow tax-free and there are government grants that can be paid to the RESP.

Strategy #2 Sign up for employer-sponsored retirement plans

If your employer offers a group retirement or pension plan, sign up and contribute to it, in addition to any personal savings or RRSPs. Many employers match contributions, which can help build your retirement savings, faster.

 Strategy #3: Invest in a diversified portfolio

Once you have started building up your savings in a high-interest savings account or TFSA, you may want to start investing some of those dollars a little more boldly to see a higher rate of return. The best approach is a diversified portfolio of financial assets that can help you grow your savings over time. This could include stocks, bonds, mutual funds, GICs, exchange-traded funds (ETFs) and a slew of other investment options. There are many risks in investing, however, so get help from a financial advisor. Be aware of management fees or costs associated with trading. A certified financial advisor can help you determine your risk tolerance and make investment decisions that align well with your goals.

Strategy #4: Consider homeownership

Buying a home in Canada is not only a personal dream for many immigrants, but it is also a smart investment. Although saving for a downpayment may take time, owning a home will help you build equity over time. Innovative rent-to-own models exist in Canada and the federal government has recently introduced a first-time home buyers’ savings account to make home ownership more attainable for Canadians. If your financial situation allows it, you can start small with a condo and move up the property ladder over time and ultimately own a bigger property. And, in the long run, as your income grows, you can pay down your mortgage with the goal of becoming mortgage free.

Medar says newcomer financial goals can become reality in Canada with patience and a plan. “With the right strategies, you can achieve your financial goals and build a secure future for yourself and your family,” she says.

With files from Daniela Cohen

The New Canadian’s Financial Pathway to Prosperity, an informative guide presented by Canadian charity, Windmill Microlending, shares tools and tips to help you build a financial foundation in Canada while setting you up for long-term prosperity. As a charitable organization, Windmill focuses on supporting immigrants and refugees in establishing their lives and careers in Canada, offering affordable loans to pay for the costs of training, education and professional development. Learn more on Windmill Microlending’s website here

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