Did COVID-19 Drain Your Savings? Don’t Worry. Do These 3 Things

You can avoid draining your savings in the pandemic by getting on top of your finances by taking three positive steps. If you’re investing, pick the Canadian Imperial Bank of Commerce stock, a rock-solid investment opportunity.

| More on:
Man with no money. Businessman holding empty wallet

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 moresdf

Did you drain your savings in the 2020 pandemic? Likewise, did you pull out of your investments because of COVID-19? It’s natural for Canadians to feel anxious about the impact of the health crisis. It’s better to keep cash under the mattress or take precautionary steps before the market bombs.

Financial experts advise against emptying your hard-earned savings. Times are challenging, but you can do three things to maintain your liquidity position and not worry. No one knows when the pandemic will end. The economic recovery might be slow such that the recession could be long drawn.

Adjust your budget

The first thing you can do to avoid depleting your savings is to get on top of your finances and adjust your budget. Stay home and go out for essential errands only. You can derive savings from fuel or commuting costs. Since there are no outdoor entertainment, school bus, and daycare expenses, you can free up some cash.

Avail of federal income-support programs

Millions of Canadians are out of work or working fewer hours due to lockdowns. Apply for income-support programs where you’re eligible to have income replacement. Before the pandemic, people were only saving 2-3% of disposable income.

According to Statistics Canada, there’s a divergence from the usual savings habit in the second quarter of 2020. The savings rate jumped to 28.2%, because Canadians were keeping, not spending, their newfound money. You won’t need to borrow, because you have the cash to spend on essentials. Some use the pandemic money to pay down debts.

Invest when possible

For people owning stocks, COVID-19 shouldn’t force you to sell, because you could lose more in a bear market. Stay the course if you believe you have a strong investment foundation in place.

If you want to start earning passive income, make sure you’re debt-free and living expenses are under control before investing. Also, it must be free cash you won’t need soon for emergencies.

New investors are flooding the stock market amid the pandemic. You can purchase some top-of-the-line dividend stocks at cheaper prices than before. The banking sector is under a lot of pressure lately, although Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) remains a rock-solid investment opportunity.

CIBC has never been a high flyer, if not one of the perennial underperformers in the TSX. But income investors favour this bank stock, because it’s a reliable source of income. The dividend track record is an incredible 152 years. Currently, the bank stock is trading at $101.20 per share and paying a lucrative 5.67% dividend.

Thus far this year, CIBC is outperforming the general market. In Q3 of the fiscal year 2020, revenue surged by 66.81% to $392 million versus the same period in 2019. The dividend payouts should be safe and recurring, as the bank keeps the payout ratio in check (below 70% at present).

Positive outcome

The coronavirus-induced lockdowns caught people by surprise. However, the government’s pandemic money turned the negative into positive. Disposable incomes are sharply rising, as Canadians begin to see the need to prioritize emergency funds. You’ll not drain your savings if you can take control of your finances.

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

growing plant shoots on stacked coins
Dividend Stocks

5 Dividend Stocks to Buy With Yields Upwards of 5%

These five companies all earn tonnes of cash flow, making them some of the best long-term dividend stocks you can…

Read more »

funds, money, nest egg
Dividend Stocks

TFSA Investors: 3 Stocks to Start Building an Influx of Passive Income

A TFSA is the ideal registered account for passive income, as it doesn't weigh down your tax bill, and any…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

3 of the Safest Dividend Stocks in Canada

Royal Bank of Canada stock is one of the safest TSX dividend stocks to buy. So is CT REIT and…

Read more »

Growing plant shoots on coins
Dividend Stocks

1 of the Top Canadian Growth Stocks to Buy in February 2023

Many top Canadian growth stocks represent strong underlying businesses, healthy financials, and organic growth opportunities.

Read more »

stock research, analyze data
Dividend Stocks

Wherever the Market Goes, I’m Buying These 3 TSX Stocks

Here are three TSX stocks that could outperform irrespective of the market direction.

Read more »

woman data analyze
Dividend Stocks

1 Oversold Dividend Stock (Yielding 6.5%) to Buy This Month

Here's why SmartCentres REIT (TSX:SRU.UN) is one top dividend stock that long-term investors should consider in this current market.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

Better TFSA Buy: Enbridge Stock or Bank of Nova Scotia

Enbridge and Bank of Nova Scotia offer high yields for TFSA investors seeking passive income. Is one stock now undervalued?

Read more »

Golden crown on a red velvet background
Dividend Stocks

2 Top Stocks Just Became Canadian Dividend Aristocrats

These two top Canadian Dividend Aristocrats stocks are reliable companies with impressive long-term growth potential.

Read more »