Immigrants Start Behind Financially, But Many Catch Up Within a Decade, StatCan Finds

It might feel a little scary watching your savings drop during your first year or two in Canada, but don’t worry too much. A new study from Statistics Canada suggests that while immigrants generally begin with less wealth than Canadian-born Canadians, many newcomers close that gap after spending a decade in the country.

The study also found that immigrants tend to build wealth differently from their Canadian-born counterparts, with more of their net worth tied to real estate and less held in retirement savings accounts like RRSPs.

The new StatCan study looked financial data from the 2016, 2019, and 2023 Surveys of Financial Security, comparing recent immigrants, established immigrants, and Canadian-born families across different levels of wealth. Researchers compared individuals in different wealth brackets to get a better picture of how wealth changes over time.

Definitions Used in the Study

• Recent immigrants: Became permanent residents 0 to 9 years ago
• Established immigrants: Became permanent residents more than 10 years ago

New Immigrants Often Start with Less Wealth

The findings show that recent immigrants – those who have first became permanent residents less than 10 years ago – generally have less wealth than Canadian-born families at a similar stage of life.

That gap exists across the wealth distribution, although it becomes proportionally smaller among higher-wealth households.

The largest differences are among lower- and middle-wealth households. By the highest wealth quartile, recent immigrants still held less wealth overall, but the gap is much smaller, proportionally.

After About 10 Years, the Wealth Gap Largely Closes

The situation changes for established immigrants: those who have lived in Canada for at least 10 years. Among established immigrants, average wealth was actually higher than their Canadian-born counterparts, at least in the first three wealth quartiles. In the highest wealth quartile, the two groups had nearly identical average net worth.

The study finds the apparent “wealth advantage” becomes a little bit more nuanced if you account for differences such as education levels and where families live. For example, families living in major urban areas typically have higher wealth in home equity, simply due to higher average real estate values in major cities compared to smaller towns.

However, even after adjusting for social and demographic factors, the wealth gap remains relatively small between established immigrants and their Canadian-born counterparts.

Overall, the broader finding remains encouraging for newcomers. The study suggests that the wealth gap narrows substantially over time, with many established immigrants reaching financial outcomes comparable to Canadian-born Canadians.

Established Immigrants Build Wealth Differently

The study also found notable differences in how wealth is accumulated.

Across the wealth distribution, established immigrants generally held more wealth in their principal residence and other real estate than Canadian-born families. At the same time, they typically held less wealth in employer-sponsored pension plans (RPPs) and Registered Retirement Savings Plans (RRSPs). Of course, this often is not by choice. Most newcomers lose out on a lot of contribution years. A newcomer arriving in Canada at age 26 has potentially lost nine years of contribution room.

Researchers concluded that greater home equity was the main reason established immigrants accumulated as much wealth as they did. While they generally had less saved in workplace pensions and RRSPs, those differences were often offset by stronger gains in housing wealth.

Newcomers are more likely to live in or near major urban centres in Canada. In these areas, housing values are typically higher than in smaller cities or towns. Take, for example, the cities of Toronto and Vancouver, which have the highest cost of housing in Canada. According to StatCan, immigrants’ concentration in large urban areas partly explains why established immigrant families hold more wealth in home equity, even as they tend to hold less in retirement savings plans.

That being said, Canada offers a range of financial planning tools and accounts that can help newcomers maximize their savings beyond home equity. For example, a Registered Retirement Savings Plan (RRSP) has tax-deductible contributions. This means that every dollar you contribute to your RRSP reduces your taxable income, which can lower your annual tax bill (or increase your refund).

For more information about Canada’s different types of investment savings accounts, check out our guide.

For prospective immigrants and newcomers, the findings offer a reassuring long-term perspective. Building wealth in Canada takes time, and newcomers often begin at a financial disadvantage. But according to Statistics Canada, many immigrants eventually close that gap, even if they follow a different path to getting there.