When I first moved to Canada, one area I never paid full attention to was my finances. I was young and thought I was going to live forever. Plus, I did not understand why I needed to be concerned about money. I was working, and I was comfortable. It wasn't until I got stuck owing a significant expense I hadn't saved up that I realized I needed to take my finances seriously.
It is more important than ever for newcomers in Canada to build on their current income. Wages don't keep up with inflation, and the Government's retirement income is not guaranteed. As newcomer women, we never know if we will stay married to our spouses forever; hence, we must prepare for financial independence. I have put together five tips on how to generate wealth.
Tip #1 - Educate yourself.
There are abundant resources on financial literacy and why it is essential. Annuity.org's resource explains why women must be financially literate. The stakes are substantially higher for immigrant women as the Gender pay gap is wider for this niche. Resources like MoneySmart and personal financing events on Eventbrite are good aids to start your financial education.
Tip #2 - Save Emergency Funds
An emergency fund is a cash you can access quickly for emergency expenses like rent deposits, major appliance breakdown, fleeing from abuse or taking care of expenses if you lose your job. Emergency funds are vital as the more you save, the more financial control you have if/when the emergency arises.
While most financial planners recommend saving about six months of your salary, Wealthsimple suggests considering your monetary/personal circumstances when determining the amounts to save.
Tip #3 - Look for a High Savings Account
Do not save your money in a regular savings account that comes with your bank. Those accounts come with minuscule interest rates. You lose money as soon as you save because the interest rates do not keep up with inflation. There are options for high-interest savings accounts to keep your emergency funds as these accounts mostly keep up with inflation rates. You can check out SavvynewCanadians as they have an up-to-date resource on Canada's best high-interest savings accounts.
Tip #4 - Retirement Planning
Retirement Planning should start as soon as you settle in Canada. Annuity.org shares why this is significant to begin at an early age. While the Government of Canada offers retirement pensions, the funds doled out are insufficient to maintain a decent standard of living. Plus, it is unclear how sustainable the pension funds are for future generations. You do not want to catch yourself off guard or rely on your dependant to take care of you later in life.
Tip #5 - Investing
There are many ways to generate wealth apart from income; one other significant way is to invest your money. Investment can be in various forms- real estate, stocks, bonds, cryptocurrency, mutual funds, etc. SavvynewCanadians have great resources for investing. Udemy also offers free courses on investing in stock markets and cryptocurrency. While there are risks to investing through various avenues (some more than others), they provide passive income and a great return on investment. To start, you can invest your money into low-risk portfolios and then move to moderate-risk portfolios and other avenues when you become more risk-tolerant.
Start now
It is more important than ever in Canada to think of how to make your money grow. Even though you might have a mix of debt, you can start saving bits of your money. Work with a financial planner to determine your combination of debt and savings ratio and take advantage of institutions offering lower fees for investing and commit for the long haul. Then adjust your saving and investment goals when your financial or personal circumstances change.
You can do this!