3 Ways to Put Your CERB Savings To Work

CERB is pandemic money you should be spending on essentials. If don’t have immediate need for it, you can invest the money in the Fortis stock to have a permanent income stream for life.

| More on:
A close up image of Canadian $20 Dollar bills

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The Canada Emergency Response Benefit (CERB), along with other federal aids, is pandemic money. First and foremost, the government created the benefits program so Canadians will have income if they’ve lost their jobs because of the pandemic. COVID-19 is the reason why the number of newly unemployed is growing.

People are supposed to use the CERB to cover the cost of essential needs and other recurring expenses like rent and utilities. The Canada Revenue Agency (CRA) is paying $500 weekly for up to 16 weeks.  In total, recipients will receive $8,000 in four months.

If you’re a CERB recipient with no financial baggage, you can make money work for you. You can convert the temporary taxable benefit into something more permanent.

Spend

CERB is also stimulus money, and when millions of recipients spend their emergency fund, there is money circulation. There’s no curtailment or significant changes to consumer spending, an important economic factor. Thus, you contribute to the stimulation and churning of the economy when you spend your CERB.

Keep the cash

You can elect to save the CERB and keep it in cash. When times are uncertain like today, nothing beats cash as a safety net. As CERB is taxable income, you can earmark a portion for tax payment in 2021 and make the remaining your reserve fund for future use.

Invest

Investing is another way to use your CERB. Other recipients are taking this option to grow the money. There are crisis-proof or defensive stocks that are offering generous dividends. Unlike CERB, which is brief and fleeting, investment income can be permanent or even for life.

The first choice for risk-averse investors is Fortis (TSX:FTS)(NYSE:FTS). Investing in this company is like investing in bonds, but with higher returns. The stock performance of this $25 billion regulated electric and gas utility company is remarkable.

Fortis is an immovable force during the COVID-19 pandemic. The shares are even gaining by 1.75% year to date. Similarly, the current dividend yield of 3.59% is safe and sustainable, given the low payout ratio of 50%. Market analysts see the price to climb by 17% in the next 12 months.

The top-tier utility stock is proving to all that it’s a haven in which to park your money, big or small. It’s not a dividend all-star with 46 years of dividend growth streak for nothing. The best part of all is that you can build your retirement wealth from the $8,000 CERB as you have an income-producing asset for keeps.

New mindset

There are plenty of lessons we can draw from the 2020 pandemic — the most important being the need to have a cash buffer when unexpected events like coronavirus happen.

If you don’t have an urgent financial need, you accumulate and save your CERB plus other emergency monetary benefits. But you shouldn’t spend them on luxuries or non-essentials at this time.

What if the federal government doesn’t have the resources to shield its citizens from the economic impact? Thus, when you return to work, change your mindset. Prioritize your financial security.

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.

More on Dividend Stocks

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Why Real Estate Stocks Are a No-Brainer Addition to Your Portfolio

Real estate stocks, especially REITs, offer some distinct advantages over other types of stocks, making them must-have additions to most…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Top TSX Dividend Stocks to Buy for Monthly Passive Income

Top TSX stocks with monthly dividends now trade at cheap prices for investors seeking passive income.

Read more »

Canadian Dollars
Dividend Stocks

Create Free Passive Income and Turn it Into Thousands With 1 TSX Stock

If you can't afford to invest, you can certainly create passive income another way and use that to invest in…

Read more »

Payday ringed on a calendar
Dividend Stocks

Canadian Dividend Investors: 2 ETFs That Pay Monthly Income With High Yields

Dividend ETFs often pay out monthly distributions compared to dividend stocks.

Read more »

think thought consider
Dividend Stocks

2 Stocks I Own and Will Buy More of if They Fall

Stocks tend to go up in the long run. Therefore, buying a basket of diversified stocks on dips should lead…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

2 Oversold TSX Dividend Stocks to Buy for Passive Income

Blue-chip dividend stocks such as Royal Bank of Canada and Manulife Financial pay investors a tasty forward yield.

Read more »

TFSA and coins
Dividend Stocks

TFSA Passive Income: 3 Solid Stocks to Earn $355 Every Month

Looking to earn steady passive income? Here are three solid TSX stocks that can help you earn a worry-free passive…

Read more »

Technology
Dividend Stocks

RRSP Investors: 2 Stocks to Buy in August for Dividends and Capital Gains

RRSP investors can still find top TSX dividend stocks trading at cheap prices today for a buy-and-hold portfolio.

Read more »