Starting your first job

From Financial Consumer Agency of Canada

Manage your finances when you start working

A new job means you'll start making your own money and have the freedom to decide how to spend it. But it may also mean new financial responsibilities, such saving or paying bills.

Even if you don’t get paid on a regular schedule or if your job is temporary, take steps to track your spending.

Use the Bank Account Selector Tool to find the account that best suits your needs.

Make a budget

A budget is a plan that helps you manage your money. It will help you figure out how much money you get, spend and save. It can guide your spending to help you reach your financial goals.

First, budget for your needs, such as rent, utilities and emergency savings. If you have money left over, you may decide put it towards other goals, such as saving for a trip, a car or a down payment on your first home.

If you don’t have enough money to cover all of your needs and wants, cut back on things you want but don’t really need.

Get started with the Budget Calculator.

Get tips on making a budget.

Repay your debt

Budget enough to pay your debts, such as credit cards or student loans. If you’re late or miss your payments, it can hurt your credit report and score.

Get tips on making a plan to be debt-free.

Set savings goals

Make saving part of your monthly budget.

You'll have unplanned expenses. For example, your car breaks down or you lose your cell phone.

Start saving so that you don’t have to use a credit card or line of credit to pay for unplanned expenses.

Start by transferring 5% to 10% from each paycheque into a high-interest savings account, a TFSA or investment account. You should be able to access your money quickly, and at low cost, in case of an emergency.

Most employers will deposit your pay directly into your bank account. You may find it easier to reach your saving goals if you set up automatic transfers from each paycheque to a savings or investment account.

Learn about savings accounts.

Find out about Tax-Free Savings Accounts (TFSAs).

Save for the long term

You may want to start saving for longer term goals such as buying your first home or raising a family.

Your new job may allow you to contribute to a payroll savings plan, such as the Canada Savings Bond Program. You set the amount you want your employer to take off your paycheque and put into your savings plan. There may be restrictions on how much you can withdraw from your plan at one time.

Find out how you can set up automatic payroll deductions to invest in the Canada Savings Bond Program.

Understand employee benefits

Employee benefits may include:

  • a health and dental care plan
  • disability or life insurance
  • a retirement or pension plan

These benefits can save you money. Find out all you can about employee benefits when you're offered a job. If your employer does not offer employee benefits, you’ll need to budget for these costs yourself.

Health and dental care plan

Your employer’s health care plan may pay for all or part of your prescription drugs, eye wear or dental costs.

Check if your spouse or partner’s employer also offers a health care plan. You may be able to save money by comparing plans and choosing the one with the best coverage for the lowest cost.

You may also save money by coordinating benefits between your plan and your partner’s plan. If the two plans have different levels of coverage, you may be able to recover up to 100% of your expenses.

Learn about health insurance.

Disability insurance

Your employer may provide disability insurance benefits. These benefits may pay part or all of your salary if you can’t work because you’re sick or injured.

Learn about disability insurance.

Life insurance

Your employer may offer life insurance, which provides money to your beneficiaries if you die. This can help your beneficiaries deal with the financial impact of your death. Life insurance you can get through your employer may cost less than term life insurance you could get on your own.

Learn about life insurance.

Retirement plan

If your employer offers a pension plan or a group RRSP (Registered Retirement Savings Plan), find out how much you can contribute to it. Your employer may match all or part of what you contribute to the plan, up to a certain percentage of your salary.

You may get some retirement income from public pensions, such as CPP (Canada Pension Plan) or OAS (Old Age Security), but it probably won’t be enough for you to retire on. If your job doesn’t offer retirement options, consider other forms of retirement savings such as TFSAs (Tax-Free Savings Account) or individual RRSPs.

Pension plan

A pension plan involves regular contributions made by your employer alone or by your employer and you. When you retire, you'll get an income from the plan. You don't pay taxes on contributions until you withdraw them.

The amount you get will depend on a number of factors, including:

  • how much you and your employer contributed to the plan
  • how long you worked for the employer

Group RRSP

A group RRSP is a retirement savings plan sponsored by your employer. You open an individual RRSP but pay into it through your employer. You contribute through regular deductions from your paycheque. Your employer may also contribute to your RRSP.

The fees to manage your plan may be lower than those you pay when you manage your RRSPs yourself. Management fees may reduce the plan’s returns and the value of your investment. Even a small difference in management fees can affect how much your investment is worth over time.

The details of group RRSPs can vary depending on the employer. For more information on your group RRSP, talk to your human resources, union or pension plan representative.

Learn more about RRSPs.

What to ask before you sign up for company benefits

Before you sign up for a benefit plan, find out:

  • when the coverage starts and if there is a waiting period
  • how much you'll pay
  • what the plan covers
  • if the benefits cover your spouse, partner, children or other dependants
  • if you can opt out of any part of the plan
  • if your employer offers a savings or pension plan, and how much you and your employer will contribute

Understand payroll deductions

Reading your pay stub may be confusing. Most pay stubs show your pay before and after deductions.

Gross pay

Your gross pay is the amount of money you get before taxes and other payroll deductions.

Besides your regular pay, your gross pay may include:

  • commissions
  • bonuses
  • vacation pay
  • overtime pay

Net pay

Your net pay, or take-home pay, is often quite a bit less than your gross pay. Your net pay is the amount of money you get after taxes and other payroll deductions. This is the amount deposited to your bank account or written on your paycheque.

Deductions

Your employer deducts income tax, Employment Insurance (EI) and Canada Pension Plan (CPP) or Quebec Pension Plan (QPP) contributions directly from your gross pay. The money your employer deducts is sent directly to the federal and provincial or territorial governments.

Other deductions may include:

  • payments you make for employee benefits
  • your contributions to an employer savings or pension plan
  • union or other professional dues

Income tax deductions

A big part of your payroll deductions will go toward paying income tax.

Your employer takes money out of your gross pay to send directly to:

  • the federal government
  • your provincial or territorial government

In Quebec, the provincial tax will be listed as a separate deduction. In the rest of Canada, there will be a single combined deduction. This covers provincial or territorial and federal income tax.

When you start a new job, you fill out a form called the Personal Tax Credits Return. Your employer uses this form to determine how much income tax to deduct from your regular paycheque.

If you have other large expenses that you may be able to use for tax deductions, such as RRSP contributions or child care expenses, fill out a Request to Reduce Tax Deductions at Source. By reducing the money your employer deducts, you increase your take-home pay with every paycheque.

Each year, your employer must send you a T4 slip, or Statement of Remuneration Paid. The T4 slip gives you a summary of your pay and all of the deductions taken from your pay in the previous year.

Employment Insurance deductions

EI (Employment Insurance) is a federal program. It provides temporary financial assistance to unemployed Canadians who have lost their jobs under certain circumstances.

EI is funded by employees and employers. Your employer will deduct your portion of EI premiums from your pay. If you lose your job, you may be entitled to receive financial assistance from EI for a certain period of time.

Find out more about EI eligibility requirements and benefits.

CPP or QPP deductions

The CPP (Canada Pension Plan) is a retirement plan administered by the federal government. Employees and employers in all provinces and territories must participate. Quebec has its own pension plan, the QPP (Quebec Pension Plan). The QPP is similar to the CPP, except that it’s funded by people who work in Quebec.

The CPP and the QPP provide basic pension benefits when you retire. Generally, the amount you receive when you retire depends on the amount you paid into the plan. If you die, the plan pays benefits to your survivors.

Employer plans

If you contribute to savings or investment plans through your employer, these deductions will also show on your pay stub, for example:

  • Registered Retirement Savings Plan deductions
  • Employer pension fund deductions
  • Employee savings or investment plan deductions

Find out about public and employer retirement and pension plans.

Avoid employment fraud

There are many different kinds of employment scams.

When you look for a job, watch out for these warning signs:

  • you must pay an application fee to apply
  • the job offer promises a large paycheque for little or no work
  • the employer has no physical address or contact person
  • the employer seems willing to hire anyone, even people with no qualifications or experience

If you think you may have been a victim of an employment scam:

The Canadian Anti-Fraud Centre (CACF) is the central Canadian agency that collects information on economic crime. The centre is operated through the partnership of the Royal Canadian Mounted Police (RCMP), Ontario Provincial Police (OPP) and Industry Canada's Competition Bureau.

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