The Motley Fool

No Savings? No Problem: Follow These 3 Steps to Build Cash Quickly

Image source: Getty Images

The statistics showing that Canadians don’t save much is astounding. A 2019 analysis by the Organisation for Economic Co-operation (OECD) reveals that Canadians are forecast to save just 3.21% of disposable income in 2020. The lower savings rate indicates that people are spending more than saving.

When there’s a financial emergency, having no savings is super scary.

If you’ve no savings today but want to start building a financial foundation from scratch, don’t dwell on past financial mistakes. Take control and move forward. It’s not too late to build savings for as long as you are serious and willing to do three steps to make cash quickly.

Take hold of your finances

The first and biggest step in the right direction is to take control of your personal finances. It involves assessing your current financial situation to find out your net worth. When you see a negative net worth, you should consider preparing a budget and work around it.

This time, you forego needless spending. If you have debts, prioritize paying them and not rack up some more. Whatever you can save is money for future use.

Set up an emergency fund

The second priority is to build an emergency fund. Life can be stressful if you don’t have the cushion to pay for unforeseen expenses. You can grow savings from step one to accumulate your emergency fund.

By setting up an emergency fund, you’re in a better position to weather a financial storm. Your debt burden should be diminishing too. Nothing should be holding you back from achieving your financial goals.

Grow your retirement savings

The third and critical step is to save for the long term to make sure you end up with concrete retirement savings. After saving money, investing naturally follows. With capital available for investment, pick investor-friendly assets that should produce income for eternity.

Purchasing shares of a reliable dividend payer is one of the best options if you’re starting from scratch. Bank of Montreal (TSX:BMO)(NYSE: BMO) was the first Canadian company to pay dividends to shareholders.

This dividend pioneer began sharing its profits with investors as early as 1829. With close to two centuries of dividend history, BMO should help people in catch up mode to generate cash quickly and build wealth over time.

With a market capitalization of $65 billion, BMO is the fourth-largest bank in Canada. The bank was able to consistently pay dividends for 191 years because of business growth and strategic investments made through the years. Dividend payouts were steady amid cyclical markets as well as recessions.

BMO is known as an investor-friendly dividend stock. The 4.16% dividend it pays today should be sustainable given the bank’s low payout ratio of 46.88%. BMO’s hallmarks are strategic acquisitions and continuous global expansion.

Financial success

The three steps presented here can only be successful if you stay on track and not backslide to your previous bad habits. Similarly, investing long-term in income-producing assets like Bank of Montreal should result in a solid financial foundation.

Saving and investing is a difficult challenge. However, it’s your only opportunity to redefine your financial future.

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you.

Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

Click Here to Learn More Today!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.