6 minute read
MONEY AND BUSINESS
MONEY & BUSINESS T o begin the New Year, we often participate in a time-honoured custom of creating New Year’s resolutions. This typically involves individuals setting self-improvement goals to fulfill throughout the year. And finances, particularly money management and saving, commonly make an appearance on resolutions lists.
In the spirit of the New Year and starting 2020 off on the right foot, below are some financial management tips specific for newcomers to Canada. These will not only help you start the year off right, but also kickstart how you manage your money in Canada.
Get to know the types of Canadian bank accounts: One of the differences you may notice first is the various types of accounts available to you. The two mostcommon types are ‘chequing account’ and ‘savings account.’ You might decide to open a chequing account for your day-to-day transactions or deposit your pay cheques. A savings account is ideal for funds that you don’t need access to on a daily basis and may be the right option for setting money aside for things like home furnishings or education.
Research available investment plans: One is the Tax-Free Savings Account, or better known as a TFSA. A TFSA is an account where individuals can set money aside tax-free over the course of their lifetime; contributions to a TFSA are not deductible for income tax purposes but withdrawals from a TFSA are tax-free. You are not required to have earned an income to open up a TFSA so it’s a great way to start investing quickly and take advantage of tax-free savings.
Build your Canadian credit history: Once you open your first Canadian bank account, it’s important to start building credit history right away. Credit and credit history is needed in Canada for bigger purchases like a home or car, but may also be required for cell phone bills, rent and other monthly expenses.
One way to start building a credit history is by applying for a Canadian credit card and using it wisely. Having a Canadian credit card and making regular payments on it is the easiest way to establish a credit history and build a good credit score in Canada, which can help you qualify for other borrowing options and lower interest rates in the future. A credit card provides other benefits as well: • It’s a convenient way to shop and pay for services without carrying large amounts of cash. • It’s often needed for certain purchases, such as setting up a contract for a mobile phone, renting a car or shopping online. • Purchases made in Canada using a Canadian credit card are not subject to exchange rate costs. Happy financial planning and all the best in 2020! New to Canada? Three tips to help you successfully manage your finances New year, new money management TIPS FOR SETTLING IN FASTER Amit Sadhu is the Vice President, Newcomer Segment, at RBC. Visit rbc.com/newcomers or visit a branch near you for help and advice to help you save more and settle in faster.
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How informed are you about payday lending? Think carefully before you apply for a payday loan
Payday loans are short-term loans with high-interest rates that are often available to people without or with poor credit history.
When immigrants move to Canada, they arrive without a Canadian credit history. Unfortunately, even if they had a good credit rating in their home country, information is not shared between countries. And since establishing a credit history from scratch takes time, payday loans become an attractive option for newcomers. What every newcomer should know
It is easy to get payday loans. Usually, they are approved instantly; do not require credit checks, documents or a co-signer; and they are disbursed quickly.
However, because of their high-interest rates, these loans can be costly in the long run and difficult to pay back. Missing a payment or failure to repay the loan can have catastrophic consequences to your finances because you will be subject to a high penalty fee. Payday loans are offered by private businesses not regulated by the government and do not help you build your credit. Payday lenders do not report borrower compliance to credit bureaus; therefore, borrowers cannot build credit or improve their credit score.
Consequently, as a newcomer, it is crucial to think carefully before deciding that a payday loan is your best option. Before getting a payday loan
As tempting as it might seem, there are a few things newcomers need to consider before choosing a payday loan.
Can you get money somewhere else? Ask friends and family if they can help you first. If what you want is to start a business or pay for education, training, assessments, credentials or licensing, a microlender can be your best option. They are non-profit organizations that offer smaller loans and typically require less documentation than banks and, depending on the lender, provide lowinterest rates. Do you understand all the fees attached to a payday loan? Comprehending all the costs associated with payday loans is essential, especially the costs you would incur if you are not able to pay back the loan.
How informed are you on payday lending? Information is key. Familiarizing yourself with the laws and regulations on the topic could
Educate yourself to make the right decision
It is expensive to settle in a new country, and savings often run out more quickly than anticipated. Payday loans may seem like a solution during a stressful, tight period but they can often create much more anxiety in the long run. Interest charges by payday lenders are incredibly high. The costs of the loan can escalate out of control, and you could find yourself in a vicious cycle of taking out payday loan after loan. This is why it is smart to consider all other options before choosing this route. More importantly, by educating yourself about personal finances and being aware of your rights and responsibilities as a consumer, as a newcomer, you can ensure you are making the right financial decisions. It would be easier for you to establish a good credit history while at the same time, managing your financial goals. By Margarita Arbelaez, Windmill Microlending
My Money in Canada is a website designed to support newcomers to Canada as they settle and establish themselves financially in Canada. Visit moneymanagement.prospercanada.org/newcomer Succeed financially in Canada
Co-founder and supporter of the Prosper Canada Centre for Financial Literacy
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