Newcomer's Budget Guide to Canada

Managing your finances as a newcomer in any country is a daunting experience but with our newcomer’s guide to Canada you’ll have your spending in order and will be well on your way to settling in Canada.

Take a look at some of the things that you should include in your budget planning for your new life in Canada.

Easy Budget Navigation

• Accommodation
• Transportation
• Food & Utilities
• Banking & Investments
• Taxes
• Top Tips to Save Money as a Newcomer in Canada

Accommodation

Rent or Buy?

Whether you choose to rent or buy is completely up to you. Most newcomers find it easier to rent first before committing to buying, however buying property in Canada could be an incredible investment opportunity. The cost of buying a house in Canada can range anywhere from $285,027 in St. John’s (Newfoundland & Labrador) to $1,320,800 in Vancouver (British Columbia). Below are some of the estimated costs of buying real estate in Canada.

The average cost of rent in Canada as of April 2021 is $1,675 per month. Depending on which province or territory you choose to live in, rent for a one-bedroom will cost about $786 in Lloydminster (Alberta) to approximately $1,935 in Vancouver (British Columbia). Below is a national overview of rental prices across Canada in 2021.

On average, British Columbia is the most expensive of all the Canadian provinces and territories when it comes to housing costs whereas Newfoundland and Labrador is the cheapest in 2021.

Top Tip Remember to include home insurance in your budget as it is legally required if you need to apply for a mortgage. The average cost of home insurance is about $960 per year but this depends on the type of home, location and risk factors.

Transportation

As a newcomer in Canada, you can easily get around without a car. Canada’s transportation system is one of the safest and most efficient globally. It is also very affordable. The average cost of a one-way ticket will cost you about $3.35 whereas a monthly pass is approximately $90. If, however, you would like to travel by car it is important to note that car prices have increased in 2021.. Fuel or gas in Canada costs around $1.12 per litre. Car insurance, like home insurance, is required by law in Canada and can cost anywhere between $717 to $1,832 per year depending on where in Canada you decide to live.

Below is a list of average annual insurance premiums by province based on data from Insurance Bureaus of Canada (IBC).

Private Health Insurance

Canada is well known for its amazing free public healthcare, Medicare, however what a lot of newcomers don’t know is that:

• the coverage differs from province to province; and
• it can take up to three months before you can use Medicare.

Public healthcare in Canada doesn’t cover additional costs such as:

• prescription medication;
• eyeglasses;
• dental care;
• physiotherapy;
• ambulance services.

This is why it's recommended to get healthcare to cover you for the first few months after arriving in Canada as well as additional private health insurance should you wish to be covered for some of the above-mentioned healthcare services.

Below are the average costs of private health insurance in Canada:

Food and Utilities

Basic utilities, including electricity, heating, cooling, water and refuge, could cost approximately $165 per month.

Your internet could cost anywhere between $36 to $93 per month (depending on the speed of your cable or ADSL as well as which province or territory you live in).

Food costs will vary depending on your dietary needs, where you live in Canada as well as your shopping and eating habits. If you enjoy eating out at restaurants; you will need to budget between $7 and $50 for a meal. According to Statistics Canada, the average Canadian household spends around $214 per person on groceries per month

Banking & Investments

Banking Options for Newcomers

Opening a bank account in Canada will be one of the first things that you’ll need to do once you arrive in Canada. To get the best value based on your specific needs, it’s best to shop around first. Canada has five major banks, all of whom offer newcomer packages:

• Bank of Montreal (BMO);
• Scotiabank;
• Canadian Imperial Bank of Commerce (CIBC);
• Royal Bank of Canada (RBC); and
• Toronto-Dominion (TD) Bank.

Remember to consider the following factors when choosing your bank:

• Locations of branches and ATMs;
• Monthly fees (many banks offer free banking or Newcomer Packages);
• Additional fees;
• Monthly fees after free period expires; and
• Unsecured credit card options (if applicable).

Below is a comparison of packages for newcomers at Canada’s five top banks:

Building a Credit Score

When moving to Canada, you won’t be able to use your credit score from home - you will unfortunately need to start building your credit score from scratch. Having a good rating could influence the likelihood of getting a job, loans and even renting and apartment or owning a home

What is a Credit Score?

A credit score is a number between 300 and 900 used to determine how creditworthy you are. The higher your score, the better.

How to Improve Your Credit Score

1. Use a secure credit card and pay your monthly balance consistently

A secured credit card is a great option for newcomers as you may not qualify for a regular credit card from the get go. They also offer low interest rates and annual fees. It works similarly to an unsecured or regular credit card, only you’ll need to deposit the same amount as you want your credit limit to be. In other words, it’s like having a prepaid credit card.

Below is a list of credit cards that you could apply for as a newcomer in Canada.

2. Use a Credit Building Tool

If you need help building your credit score, companies such as KOHO have credit building tools, for as little as $7 per month!

Investment Opportunities

As a newcomer in Canada, you should start investing in your future as soon as possible. Two great options to consider are Tax-free Savings Accounts (TFSAs) or Registered Retirement Savings Plans (RRSPs).

Tax-free Savings Accounts (TFSAs)

TFSAs allow you to invest your money long term without having to pay taxes. One of the added bonuses, besides the compound interest, is that if you don’t reach your annual contribution limit you can make up for it in your second year! Your money will also be available to you whenever you need it however it’s better to leave it where it is if you can.

Registered Retirement Savings Plans (RRSPs)

RRSPs generally have higher contribution limits than TFSAs, however the main difference is that you can contribute 18 percent of your income from any given year. Withdrawals from these accounts are however taxed. This is to eb=ncourage long term investing and prepare you for retirement.

Taxes

Canadian Income Tax

Canada’s tax system is graduated, which means that the higher your income is, the more you will be taxed. The money you earn is divided into income tax brackets, each with different tax rates. You will first be taxed at the rate of the lowest tax bracket and then pay the higher rate for each additional dollar.

For example, if you earn $1, you’ll be taxed 10 percent. On the second dollar you’ll pay 20 percent and on the third dollar you’ll pay 30 percent. You will, however, never pay 30 percent on $3. Instead, you will pay $0.60, which works out to about 20 percent.

You have to report your income to the Canadian Revenue Service (CRA) by filing a tax return.

It is important to note that each province or territory has different tax rates and income brackets. Below is a breakdown of income tax rates by province/territory.

It is important to file your return as you may be able to claim for certain expenses, such as:

• Medical
• Travel eg. monthly transit passes
• Business eg. rent, supplies, travel etc.

Deductions could reduce your taxable income and therefore lower your tax rate.

You could also be eligible for certain payouts like:

• Child tax benefit;
• GST/HST credit; or
• Guaranteed income supplement.

Sales Tax in Canada

Sales tax or Goods and Services Tax (GST)/Harmonized SalesTax (HST) is 0 percent on groceries in Canada, however differs for other goods based on which province or territory you find yourself in.

• 5 percent in Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Quebec, Saskatchewan, and Yukon.
• 13 percent (HST) in Ontario; and
• 15 percent (HST) in New Brunswick. Newfoundland and Labrador, Nova Scotia, and Prince Edward Island.

Remember that in Canada the sales tax does not appear on the price of the item you are buying but will be added when you get to the point of sale.

Top Tips to Save Money as a Newcomer in Canada

1. Speak to Locals to Find the Best Deals

There are so many ways that you can save money while living in Canada. Besides checking online, the best way to find the great deals is to speak to Canadians in your area. You’ll find that they often know where all the good unadvertised deals are, which could save you quite a few dollars.

Some chain stores in Canada such as Walmart and The Real Canadian Superstore have a 10 percent price match or will match their competitors’ prices. Many stores also offer coupons which could lead to great savings.

2. Prepare for Unexpected Expenses

It is always a good idea to have some money kept aside for unexpected circumstances. For instance, if you immigrate to Canada through programs like the Federal Skilled Worker Program, where you don’t need a job offer in Canada, you may need some funds to cover you for your first few months in Canada until you find a job.

Other unexpected costs could arise if you are a homeowner and you may be required to have money available for maintenance. A good amount to set aside is between three and five percent of the value of your home.

3. Stick to Your Budget

As difficult as it may be, try not to stray from your budget. It is better to have some money on stand by for those unexpected circumstances that we mentioned. Having an emergency account with funds set up before you arrive in Canada could be the best idea so that you won’t have to dip into your savings. The more prepared you are the better.

Ready to Get Moving to Canada?

Applying for a visa for Canada is an important yet daunting step in anyone’s life. It’s life changing in so many ways, which is what makes every opportunity to immigrate to Canada a worthwhile one. By spending your hard earned money wisely you will be able to provide yourself and your loved ones with a future filled with opportunity and happiness.