The Motley Fool

Could the CRA CERB End in Fiscal Disaster for Canada?

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The worst of times can bring out the best in people. While CRA is not exactly a villain, it typically takes money from Canadians. This year, it has given money in the form of CERB. The emergency relief fund has been a lifesaver for 8.6 million Canadians who’ve received at least one CERB payment. It’s still sustaining about 4.5 million Canadians who haven’t found jobs or recovered their source of income yet.

The CERB is coming to an end now, but thankfully, the government isn’t leaving Canadians stranded. Apart from another month of CERB, the EI has been solidified, and terms to qualify for EI have been softened so that more people can be eligible. For those who don’t qualify for EI, even with the lax requirements, there are three new temporary programs being launched.

The double-edged sword

There has been opposition against CERB ever since the program started. There are people for whom CERB has been the difference between putting food on the table and starving their families. And if you look from their perspective, opposing CERB might seem cold and heartless. But the truth is, there was a solid rationale behind opposing CERB.

There are two major fiscal threats that payment like CERB pay pose to a country’s economy. One is that it might discourage people from rejoining the workforce and start contributing to the economy. Since CERB has mostly been a no-strings-attached payment (unlike EI that requires them to actively search for a job), it had the potential to slow down economic recovery by keeping a big chunk of the workforce at home.

The second problem is artificially pumping money into the system. Thankfully, the Canadian government has taken measures to prevent the country’s economy from being cut by the other edge of this useful double-edged sword. The transition to EI (for 3 out of 4.5 million current CERB recipients) takes care of the first problem that CERB presented to the economy.

The government is also freezing premiums for two years. It has likely compared the risk of stopping all benefits and effectively switching off income for millions of Canadians to the risk of inflating the economy with financial aid and decided that the former would be more devastating for the economy.

Future planning

People who needed CERB to sustain themselves and didn’t have any savings or backup plan should ask themselves the hard question: What would have happened if the government didn’t come to their aid with CERB? The most important takeaway from that introspection is that Canadians need to save and invest. Even small amounts in decent growth stocks can do wonder for their savings.

One affordable stock that can help Canadians build up their savings is People Corp (TSXV:PEO). The company has a five-year compound annual growth rate (CAGR) of 26.22%; if it can keep it up for another eight years, $50 a month in the company might get you to $14,000, equivalent to seven months of CERB.

It’s a management consulting company and offers group benefits, group retirement, wellness, and human resource solutions to several different businesses. The $730 million market cap company has a solid balance sheet.

Foolish takeaway

Even saving and investing relatively smaller amounts in the right stock can bring a decisive change in your life. Even if you can’t earn enough for financial freedom through small investments, you can still build up decent-sized nest eggs that can help you out in times like the current pandemic. Government aid should be welcomed, but it shouldn’t be your last resort.

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 Adam Othman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends People.

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