One’s ability to make well thought out and informed financial decisions is vitally important to function in Canadian society and the country. Many newcomers are ill-prepared for what meets them in Canada on a financial point of view, with many being susceptible to issues like fraud.
Before setting foot in any foreign country, it is essential to know your financial rights and responsibilities as they are the first step to being financially independent.
The following are a list of 7 financial mistakes that you need to avoid and are very important to note:
1. Not building a credit history
Building a credit history is one of the most important first steps towards improving your understanding of the financial aspect of your settling in period as a new immigrant in Canada. Building a credit history will help you with renting an apartment, and borrowing money in the future for school, a car, or a home.
An ideal credit score number is between 300 and 900, with a high number signaling to a lender that you will likely be able to pay them back and improves your chances of borrowing more money in the future. Establishing a clean credit history should be a priority and you can ensure a high score by paying bills on time.
2. Avoid being reckless with credit cards
Credit cards are one of the easiest ways to create a credit history, but they can cause a lot of problems if not used properly and with responsibility.
In the financial literacy course conducted by the North York Community House, in Toronto it was found that nearly 50% of newcomers to attend the course had a credit card but do not know their interest rate, grace period or what happens if they miss payments. Many others completely avoid having credit cards as they are used to using only cash in their home country.
Newcomers in Canada are advised to take their time and research the interest rates and benefits the credit card company will provide. It is important to note that signing up for a credit card should not be a decision to be taken lightly.
3. Not reading the finer details
A lot of department stores and other shops entice customers with deals like; buy now and pay later, or asking you to register for the store’s credit card by offering one-time discounts on purchases. They are easier for newcomers to get but they often come with high interest rates especially when you fail to pay on the agreed upon time and this can affect the credit score of the concerned individual.
4. Failure to file taxes
It is important for newcomers to know that filing taxes is important to do even if you do not have employment income yet. Many government benefits such as GST credit the Canada Child Tax Benefit, among others that are only given to individuals who file their taxes.
5. Having no relationship with any Bank
Many newcomers have the assumption that they are not eligible to open a bank account right away, however, this is a wrong assumption because if you have two pieces of identification and qualify under the Banking Act, you are eligible to open a savings or cheque account.
Establishing a relationship with a financial institution in the early stages of your arrival can help speed up the process of getting access to credit facilities when you need them. Banks will be able to provide you with all the necessary information for issues such as saving for your child’s education, your retirement and mortgage programs if you are planning on owning a home.
It is also important to take your time when choosing a bank, as selecting a bank that is in a convenient location can save you money. Other issues that you may experience are those associated with varying bank charges. ATM’s will cost you more than when you use the bank’s own ATM. Small details like that can prove to be very beneficial and help newcomers in the country.
6. Overreliance on payday loans
To put it in a simple way, payday loans are a very expensive way of borrowing money and have in the long term proved to be the downfall of many immigrants who were riddled with debts they could not afford to pay. Loan centers charge interest rates of up to 90%, making them difficult to break free from and should be avoided as much as possible especially for a new immigrant in Canada.
Managing your finances and money is usually easier said than done. It is therefore, important for a new immigrant to join any Canadian Centre for Financial Literacy program in the city or town where they are based.