How to Save Money in Canada For Newcomers
In this article, we will share with you some simple tips on what you can do to save money as a newcomer or immigrant to Canada and the role budgeting plays in it.
There are two types of money-saving tactics we will focus on:
- “Spending less” than you would have otherwise - because you’re smart about your choices, resources and decisions.
- “Putting money aside”, as a safety cushion that you can turn to at the times of need.
Let’s start with some general philosophy to managing your spending, followed by ways you can spend less first. And once you are able to spend less, you can use that leftover money to start saving your money!
Start Budgeting
First and foremost, if you don’t do that already, start budgeting. Budgeting is essentially a plan of how you want to spend your money over the course of the month.
The simplest exercise we recommend you do is look at what you’ve spent in the last week, or, if you can, in the last month, and try to recollect every single thing you’ve spent money on. Going back in time rebuilding a list of the things you’ve spent your money on is a powerful exercise to help you reflect on your spending habits.
Once you have a general understanding of your spending habits, we recommend you start building your own plan. There are many methods to do it, but for starters, we would recommend you the 50/30/20 rule. This rule was popularized by U.S. bankruptcy expert, Elizabeth Warren. It says that about 50% of your money spent should go on your needs - the things that you have to pay for no matter what, these are your basic needs: housing, groceries, utilities, transportation.
Your 30% should go on your wants - the nice to haves, the things you’d want to spoil yourself with every now and then: new shoes, dinners out, hockey tickets.
And the remaining 20% should go into savings & debt repayment - the foundation for your safe and stable future: downpayment for a house, college savings and retirement funds.
With this model, you are making sure you are distributing your expenses across the 3 main aspects of your life. The biggest chunk goes into your basic needs, because according to the pyramid of Maslow, if you don’t have that solid foundation, it’s nearly impossible to think about everything else that goes on top. Then, you have 30% on the fun things and 20% on the not-so-fun things.
Depending on your goals you may want to tweak this, and decide to save more, or even less - it’s up to you and your personal situation.
How to start saving more
First, you can do it by spending less money. The biggest expense is always your rent, here’s what you can do:
1. Rent your home away from downtown
Don’t rent it in the middle of the hustle and bustle. The prices will always be too high. We know you might be used to big cities, but when in Canada, your main priority is to establish a good, comfortable base, and that means moving a little out of the city. Taking a 20 - 40 minute commute is not that big of a deal if it means saving an extra 500 or even 1000 dollars in some cases. Yes, rent prices can drop significantly as you move further out of the city.
2. Find roommates
Finding roommates is always the best way to easily save half of your rent, especially if you’re a student or single. And if you’re a young couple, it might be worth looking into renting a house with another couple of friends. A house would have enough space for everyone, without you guys invading each other’s privacy. Cohabitating or cohousing has actually been on the rise in some parts of the world, and it helps you save money while providing some sense of support and community because you have another person or couple to get help from, chat or simply vent about your day.
3. Go to cheaper grocery stores
The second biggest expense is your food. In Canada, there are many large, medium and small grocery chains. Some are considered high-cost, while others are much more accessible. If you want to save some money on food, we recommend checking out small local grocery stores.
If we’re talking about grocery chains, Food Basics and No Frills are just some examples of cheaper grocery stores. The only thing to note about cheaper grocery stores is your food selection might be smaller, and the food, especially vegetable and fruits, will not look as good as in some other top-tier grocery stores.
Protip: Asian supermarkets always have great prices and decent food quality!
5. Avoid Eating out
It may be tempting and way too easy to opt for takeout food, but buying groceries and cooking at home is always cheaper. It’s often healthier too!
6. Save on Utilities
Another big expense is utilities. Internet, cellphone and electricity - are your top three spenders.
Tip: always shop around for deals for internet and cellphone. They are not easy to find, but if you go out of the big 4 telcos, and look at smaller providers, you might find a deal that works well for you. Plus, if you bundle services together, you will always get a good deal too.
As for electricity, heating, water and other basic utilities, there are not many ways to save, but if you use big energy spenders like washing machines and dishwashers, do it on weekends or evenings, because the electricity rate is cheaper then!
7. Saving on nice to haves
The rules of the game are simple - what are you spending money on that is really adding value and bringing you happiness? The first thing we recommend you do is to close streaming, storage and subscriptions you don’t really need and team up with your friend or partner for the subscriptions you do need. The next thing we recommend you do is to unsubscribe from deal and sales emails that continuously prompt you to buy something you don’t want.
Also, you can reduce the number of drinks and meals you buy when you go out.
Another small tip: do spring cleaning every year, clear your closet and get rid of stuff that you’re ready to sell or donate.
Set Up Saving Accounts
The first thing when you start saving money is to set up your savings account. There are different types of savings accounts, and we recommend opening several of them.
The first thing you should start with is a High-Interest Savings account. When you put money into this account, the bank pays you interest on simply keeping your money in the bank for a long time. When looking for such an account, we recommend avoiding the big banks - they have a very low-interest rate on your savings, which will make your savings grow way slower than inflation.
We’ve done some research and would love to recommend Neo Savings Account. Neo Savings does everything an everyday bank account does but also gives you one of the highest interest rates on savings in Canada (2,25%), that’s 225x more than at any traditional bank. There are no minimum balances or monthly fees. Simply pay bills, and make Interac e-transfers, deposits and withdrawals, all from one convenient place. It will get you one step closer to reaching your savings goals and building your wealth in Canada.
Once you have your HISA set up, we recommend you set up your TFSA - a tax-free savings account and your RRSP - your registered retirement plan. Both of them will come in handy when you start saving a lot more money or decide to start investing in the stock market. These accounts will allow you to save on tax, for instance, depositing a portion of your income into an RRSP account will allow you to reduce your taxable income by the amount you deposit on your RRSP in the given year.
We also recommend you set up recurring automatic deposits from your bank account into your savings account to remove as much risk from this saving equation as possible. Your savings should be put on autopilot!
Another cool way to start saving money on autopilot is to opt into the round-up service that some financial products offer. This service connects to your credit card and tracks the amounts you spend from each purchase, rounds it up to the full dollar and automatically moves the rounded-up amount into your saving account. It’s not a lot, but cent by cent it adds a significant amount to your investments by the end of the year.
Alright, we hope these tips were helpful for you and you will use them to save money to move to Canada or to build your wealth and financial literacy while living in that beautiful country! Stay tuned for our next articles on how to arrive, excel and thrive in Canada and consider subscribing to our Youtube channel.
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