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Financial Planning for International Students

Updated: Aug 18, 2023

Money is a sensitive topic for many international students. You may have left your country where you worked as a lawyer or a marketing manager. You had a nice place all to yourself, no roommates, a nice car, and money wasn't your biggest worry. But then you made the brave decision of coming to Canada and starting your life all over again. Working new jobs and living paycheck to paycheck. And although you may have experienced managing big budgets at work back in your country, when it comes to Canadian personal financial planning… it gets tricky.

This article introduces you to financial literacy and personal planning. Helping you to begin to understand budgeting, saving and investing. Financial literacy is basically the understanding of financial concepts and having the skill to use the tools that help you make informed decisions about your personal finances. Financial literacy empowers you to take control of your financial well-being, make wise financial decisions, and navigate the complex financial landscape with confidence.

Understanding the Canadian Financial System

Differences between the Canadian financial system and other countries

Each country has its own set of rules and systems when it comes to handling money. Therefore, the way money works in Canada can be a little different from what you're used to back home. In Canada, we have a financial system with its own banking regulations, taxes, and how the country exchanges currencies, among others. It's critical to understand these differences so you can smoothly navigate the Canadian financial system without any hiccups.

Common financial terms used in Canada

Sometimes financial terms can sound like a bunch of jargon, but once you get the hang of it, it's not so bad. In Canada, they use certain words and phrases to talk about money matters. For example, you might come across terms like RRSP, which stands for Registered Retirement Savings Plan. It's a way to save for your future retirement while getting some tax benefits. Then there's TFSA, which is short for Tax-Free Savings Account. It's a special kind of account where you can save and invest money without paying taxes on the money that is in the account. Understanding these terms will help you make sense of the Canadian money talk.

Types of financial institutions in Canada

Canada has all sorts of places where you can handle your finances. You've got banks, which are like the big guys that offer a bunch of services like checking and savings accounts, loans, and mortgages. Credit unions are similar to banks, but they have a different setup where they're owned by the people who use them. Insurance companies are there to protect you and your valuables by offering things like life insurance and home insurance. Investment firms are all about helping you grow your money by offering investment advice and managing your investment portfolio.

By understanding these points, you'll feel more at ease when dealing with the Canadian financial system, talking about money using the right terms, and knowing where to go for different financial services. Banks and other institutes have financial advisors that help you understand the institution's different services. They can help you identify your financial goals, retirement planning and other financial services. So don't hesitate to make an appointment with a financial advisor or multiple advisors. If you are still deciding on what bank you want to open an account with, in the ‘Your Canadian Bank Account article we cover the big 5 banks in Canada.

Managing money effectively

Budgeting and managing expenses

Budgeting helps you have better control over your expenses. By knowing where, when and how you spend your money you can find ways to make the most out of your income. This can potentially lead you to have more money to do the things you love and save every month. Everybody loves having some extra money!

You can start with simple steps. For example, find a personal budgeting template online – Google Sheets has a few of them. Write down your monthly income and your expenses. If your income varies, then, put down the minimum or average amount you receive. Now, assign a day every month to fill it. This visual presentation, over time, will help you stay on track and recognize patterns in your spending.

Tips for saving

The patterns you recognize can help you find ways to save on indirect expenses such as subscriptions that you don't really need.

Here are some tips on saving:

1. Save with a purpose - set targets when saving. Are you saving for a new phone? You can set multiple targets for your savings and allocate a monthly contribution from your salary.

2. Audit your credit card - We don't usually look closely at our credit card expenses. You can be getting charged for 2 Spotify accounts for almost a year and never notice it! True story ☹️ Conducting a credit card audit is a good way to get rid of some expenses.

3. Maintain a minimum balance - This does not apply to you if you have a student bank account, as they are usually free. However, if you don't have a student checking account, see if your bank has a minimum balance requirement to waive the account fee. In Scotiabank, for example, you need $4000 in your account at all times so you can waive the $16.95 monthly fee.

4. Reduce expenses - Look at your expenses and see where you can save some money. Is your phone plan too expensive? Look for an alternative provider as they always have different promotions. Are you spending too much on groceries? You can go to some of the top budget-friendly grocery stores in Vancouver.

5. Pay yourself first - It sounds counterintuitive, but when you get your paycheque, consider putting away your planned savings first. We commonly put away all our expenses first (rent, credit card and other bills) and whatever is left goes to savings. Although, there is always that extra unanticipated expense and savings become the last thing on your priority list, putting your savings first will pressure you to get creative with money.

Building credit history in Canada

Your credit history is an extension of your presence in Canada, even as an international student. In our article, ‘Understanding Credit Scores in Canada’, we emphasized the importance of getting a credit card as soon as you can. Having a credit card is the most straightforward way of gathering credit history amongst many other ways. Acquiring that financial knowledge will not only allow you to have a pristine credit history but it will help you plan for the future.

Investing for the future

Part of planning for the future is investing your money for future financial security. If you have plans to remain and settle in Canada, start investing your money early on. Although, figuring out how, might be the most confusing thing about this article. But there are people out there that can help you. If you want to invest in bonds and shares, then you can speak with a financial advisor or a financial coach for free. You can book an appointment with a financial advisor through your bank, even if you don’t have an active account with them.

“It's never too early or too late to start saving for your financial goals. One of the most significant barriers to saving is the belief that you need a large sum of money to start. However, starting small is a great way to build the habit of saving and working towards your long-term goals. This approach not only helps you build your savings but also instills the discipline needed to make saving a regular habit.” Wendy Valerio, Financial Coach.

You can chat with Wendy to learn more about what she offers to students as a financial coach on our Slack Community.

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