The CERB did what it was introduced to do. It helped millions of Canadians when they lost their livelihoods. The program had some unintended consequences as well, like encouraging several people to rely on government benefits instead of rejoining the workforce, but it was unavoidable. Now that a second wave is hitting the country, people might be wondering whether the CERB will be extended again.
It’s a natural question to ask. The CERB has been immensely helpful and very easy to get compared to its alternatives that Canadians now have to shift to. But the program has already put a significant strain on the government’s funds and raised the deficit level quite dangerously. So, it’s hard to speculate whether the CERB will be revived or if EI will reign.
CERB extension
Officially, the CERB has ended. Right now, there are no plans for its revival, and the government already has systems in place to assist the people who still haven’t gotten their livelihoods back. Most would be transferred to the EI, and the ones that don’t qualify (even with its now-lenient qualification criteria) will be switched over to the other three programs the government has introduced to replace CERB.
While there is no surety, the chances are that the CERB won’t be extended again. For one, the government is already under a severe financial strain, and it might have to divert substantial funds towards at-risk businesses to sustain them through a second wave. Secondly, the government needs to motivate the people to rejoin the workforce, and EI is much better for this purpose than the CERB.
Personal alternative
A much better alternative to CERB or even EI would be something that you owned yourself. If you have investments, they can act as your safety nets in financial crises. If you are going through the uncertainty of CERB’s extension or the difficulty of adjusting to EI, the first thing you should be trying to do is replace your lost income. When you’ve found a job or restarted a business, you should start creating a nest egg for yourself.
You can pick one of the still discounted stocks, like Sun Life Financial (TSX:SLF)(NYSE:SLF). It’s currently trading at a price that’s still 16% down from its pre-pandemic valuation, with a price-to-earnings ratio of 14.2 and price-to-book ratio of 1.4. It’s also offering a decent yield of almost 4%. If we consider its 10-year CAGR (dividend adjusted) of 12.39% and hope that the company can grow at the same rate for the next decade, it can help you build a sizable nest egg.
If you can invest just $100 every month in Sun Life (or a stock that offers a similar growth pace), you would end up with a $23,000 nest egg in a decade — only about half of which would be your contribution. And that is equivalent to at least 11 months of CERB payments.
Foolish takeaway
The CERB was always a temporary benefit, and even if it’s extended, it would be for another limited spell. Instead of waiting and hoping for the government to help, you should focus on building your emergency reserves and growing your nest egg. Even if you don’t have a lot of money to start with, buying good companies and great prices and holding on to them for several years might help you make up for it.
