During Sobia Ali’s first few years in Canada, she found it almost impossible to save money. She first moved to Toronto from Pakistan in 1997, after marrying her Pakistani fiancé, who had already moved to Canada. Despite having teaching experience and a degree in math and statistics from the University of Karachi, Ali was unable to find a job.
Eventually, she found a gig with a temp agency making $10 an hour, but most of her salary went to pay for daycare for her three-year-old daughter, Abir. Undeterred, Ali, now 43, set up a savings plan at her bank that automatically funneled $100 a month into her savings account. “It worked,” says Ali. “At the end of the first year, I had $1,200, and I started investing. I kept saving, and I used some of the money to buy a house last year.”
What are your goals?
After the rush of your first few years in Canada is over, and you’ve got your career on track, it’s time to focus on saving money and investing for the future.
Your first goal should be to save three to six months’ worth of living expenses in case of an emergency. After that, how you invest your money will depend on the ultimate purpose of the money: if it’s for a short-term goal, such as purchasing a home or car in a couple years, you should stick with low-risk investments, such as a bond fund, money-market fund, GIC* or just keep your cash in a high-interest saving account*.
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For goals that are more than five years away, such as retirement, consider putting a portion of your money in stocks. A good rule of thumb is that you should hold a proportion of safer investments, such as bonds or money market funds, that is equal to your age and put the rest in stocks. For example, if you’re 40 years old, you could hold 40% of your portfolio in bonds and 60% in stocks. As many immigrants come into the country in mid-career, they have a shorter length of time before retirement, so you should plan your portfolio accordingly. If you have investments in your native country as well as in Canada, make sure to look at your investments as a whole to ensure a proper balance.
If your employer offers a pension plan or a group retirement plan, you should almost certainly join. Pension plans often include contributions from your employers and either type of plan likely allows you to pay lower investing fees. So you’ll grow your retirement savings faster than you could on your own.
Avoid unnecessary risk
Immigrants are risk-takers by nature, and many come from rapidly growing countries where they are used to high returns. However, using your retirement funds to place bets with risky stocks is not a good plan.