Set financial goals, save and grow your money
One in three Canadians face volatility in their regular income, which makes it harder to save, according to a 2019 study by the Chartered Professional Accountants of Canada (CPA) Canada. For newcomers to Canada, income uncertainty can be a real fear if they start seeing the savings they immigrated with depleting as they work to establish themselves in their new country. So, what can you do to save and grow your money? Should you set aside money in a savings account? What about other investment tools? With all the other challenges you’re facing as a newcomer, saving and investing options can seem downright daunting.
“Working with a CIBC advisor can help you navigate the various savings and investment options available to you to grow your money,” says Carissa Lucreziano, Vice President, Financial and Investment Advice with CIBC.
If you’ve been following along with our Newcomer Financial Guide, you’re probably already on the right path; you’ve opened your first bank accounts (see article 1 in the guide) and started building your credit history (see article 2). So, think of investing in your future as the next logical direction in your immigration journey. Here are five steps you can take as a start.
Set your financial goals.
You can start by asking yourself what you are saving for. In the short term, are you saving for tuition costs for retraining or relicensing exams? A car to get around in? Or, perhaps, in the medium term, a home to call your own?
And, for the long term, it’s never too early to think about saving for retirement or your children’s future.
“From saving for your children’s education to buying a home, defining your financial goals is an important first step,” says Lucreziano. “Knowing what you are saving for — and when you need the money by — will help guide your savings and investment choices.”
Look at your income and expenses.
Making a household budget may not exactly be the way to spend a fun Saturday night, but it’s an important second step to understand how much money is coming in — income — and how much is going out — expenses — on a monthly basis. Having a clear idea about your income versus expenses can help you determine how much money you can set aside for savings. An advisor can help take a look at budget and come up with a realistic plan to start saving, even if just a little in your first year in Canada.
Set up simple, good habits.
Saving money can start simply, with a savings account. When you put money into a savings account, you start earning interest. More importantly, the habit of transferring money to a savings account on a regular basis will serve you well. It’s about creating a mindset to put aside money to save for your goals.
“CIBC has several savings accounts that pay interest on every dollar that you can choose from based on your unique needs including the CIBC eAdvantage® Savings Account, CIBC Bonus Savings Account and the CIBC Premium Growth Account,” says Lucreziano. To grow your savings consistently, you may want to consider setting up automatic deposits, perhaps monthly or every payday. “The key to accelerating your savings is to get your money working for you by ‘paying yourself first.’ To do so, set up automatic withdrawals from your pay cheque into your savings account before you’re tempted to spend the money on anything else,” says Lucreziano.
In addition to regular savings accounts, there is also something called a tax-free savings account (TFSA). When you follow the rules, amounts that you put in the account, as well as any income earned in the account through investments, is tax-free, and there is no tax on amounts that are withdrawn. Applying for a TFSA with CIBC is easy and you can learn more here.
Understand your risk tolerance.
As “saving” moves into “investing,” here’s where terms such as guaranteed investment certificate (GICs), registered retirement savings plans (RRSPs), mutual funds, exchange-traded funds (ETFs) and stocks come into play. “Different investment solutions come with various levels of risk, however, so our CIBC advisors can help guide you to pick investments based on your risk tolerance, your goals and your timeline,” says Lucreziano.
Typically, investing in products like GICs or higher-risk investments like mutual funds is done with medium or longer term goals in mind, such as saving for a down payment for a house or your retirement, because they may not be immediately redeemable or may have greater short-term risk of a decrease in value.
Keep track of your money
After you’ve taken these steps toward saving and investing, you can keep track of how your money is doing and make adjustments to reflect changes in your income or life.
For example, if you have a new baby, ask your banker about opening up a registered education savings plan (RESP) to start saving for their post-secondary university. In an RESP, your money grows tax-deferred and you can access grants provided by the Government of Canada of up to $7,200 during the life of the plan.
“There are many options for saving for your future. Take some time to get acquainted with the options and benefits. It starts with understanding your budget and setting up a savings account to start putting money away for the future. Our advisors are here to help guide you through your financial journey,” says Lucreziano.
-Nicola Enright-Morin – CanadianImmigrant