Advertisement
Canada markets close in 6 hours 10 minutes
  • S&P/TSX

    22,010.82
    +112.84 (+0.52%)
     
  • S&P 500

    5,252.23
    -14.72 (-0.28%)
     
  • DOW

    38,093.17
    -348.37 (-0.91%)
     
  • CAD/USD

    0.7308
    +0.0016 (+0.22%)
     
  • CRUDE OIL

    78.69
    -0.54 (-0.68%)
     
  • Bitcoin CAD

    93,282.74
    +555.62 (+0.60%)
     
  • CMC Crypto 200

    1,463.66
    +7.79 (+0.54%)
     
  • GOLD FUTURES

    2,367.30
    +3.20 (+0.14%)
     
  • RUSSELL 2000

    2,043.73
    +7.55 (+0.37%)
     
  • 10-Yr Bond

    4.5660
    -0.0580 (-1.25%)
     
  • NASDAQ

    16,887.31
    -33.27 (-0.20%)
     
  • VOLATILITY

    14.30
    +0.02 (+0.14%)
     
  • FTSE

    8,217.56
    +34.49 (+0.42%)
     
  • NIKKEI 225

    38,054.13
    -502.74 (-1.30%)
     
  • CAD/EUR

    0.6745
    -0.0001 (-0.01%)
     

How to Earn $1,317.16 in Passive Income With Less Than $10K in Savings

Simple life style relaxation with Asian working business woman healthy lifestyle take it easy resting in comfort hotel or home living room having free time with peace of mind and self health balance
Image source: Getty Images

Written by Amy Legate-Wolfe at The Motley Fool Canada

So you don’t have much in savings, but want to create more passive income. Well, you’ve certainly come to the right place! While investing is certainly a part of creating passive income, there are many things to consider. And first and foremost, risk should be one of them.

When it comes to creating passive income with $10,000, risk should be first and foremost on your list of concerns. That’s not enough to see you through an emergency like losing your job. It’s not enough to cover costs in retirement. But it is enough to get started on creating enough to cover a job loss or retirement.

ADVERTISEMENT

In fact, given time, you can create a strong amount of passive income even with just $10,000 in savings. So let’s get started.

Creating more income

Rather than trying out a million side hustles or even other passive income streams, investors should consider options that they can perform long term. While some of us might be able to become ride-share drivers, work evenings and weekends, or rent out storage, not all of us have that option and time on our hands.

Because of that, I would instead look to your current job to create more income. That could involve increasing your income by asking for a raise. Or, if your boss isn’t going to provide that, go somewhere that will. It’s your life, and you have to make the most of it. And if that means you’re not making enough to cover your costs at your current job, it could be time to go elsewhere.

This alone can create a significant increase in income and you’ll still be performing the same job. From there, I would then start putting aside cash on a regular basis. This can be done through automated contributions from each paycheque. So let’s get into that next.

Getting to $10,000

Let’s say you want to create $10,000 on an annual basis. That’s a large goal that would make up over 10% of a $60,000 salary. A 10% goal is usually as far as I would take saving for investments. However, if you can afford it, then it would mean putting aside about $830 each month for just under $10,000 in savings.

Meanwhile, you’ll want to research options that can provide you with a diversified stream of passive income. And again, risk should be a main concern. So don’t put that $10,000 all into one basket. Instead, consider a mixture of GICs, stocks, and exchange-traded funds (ETF).

If you’re really focused on passive income in this case, I would look for a dividend stock that has growth both behind and ahead of it. In this case, consider a company such as Bank of Montreal (TSX:BMO). BMO stock is on the rise, with a diversified portfolio spanning North America. It also provides the largest ETF holdings in Canada. All while having a 4.54% dividend yield.

In fact, I would consider a BMO ETF as well that focuses on passive income. A strong option is BMO CA High Dividend Covered Call ETF (TSX:ZWC). This ETF holds a 3.97% dividend yield, with shares already up 7.5% year to date. It offers a low expense ratio as well, with a management team keeping your passive income high.

Bottom line

Now let’s look at how much passive income you could make in the first year of performing this. First off, $830 each month would create $9,960 in savings. Then consider BMO stock has a compound annual growth rate (CAGR) of 6.1% in the last decade, with ZWC ETF at 9% since the pandemic bottom. Here is how this could play out in the year to come with $4,980 in each stock.

COMPANY

RECENT PRICE

NUMBER OF SHARES

DIVIDEND

TOTAL PAYOUT

FREQUENCY

PORTFOLIO TOTAL

NEW PRICE

NEW PORTFOLIO TOTAL

BMO

$132.85

37

$6.04

$223.48

quarterly

$4,915.45

$140.95

$5,215.29

ZWC

$17.38

287

$1.20

$344.40

monthly

$4,988.06

$18.94

$5,436.99

Now you’ve created dividend income of $567.88 and returns of $749.28! That’s total passive income of $1,317.16 from your original $9,903 investment.

The post How to Earn $1,317.16 in Passive Income With Less Than $10K in Savings appeared first on The Motley Fool Canada.

Should you invest $1,000 in Bank of Montreal right now?

Before you buy stock in Bank of Montreal, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Bank of Montreal wasn’t one of them. The 10 stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $15,578.55!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 32 percentage points since 2013*.

See the 10 stocks * Returns as of 3/20/24

More reading

Fool contributor Amy Legate-Wolfe has positions in the BMO Canadian High Dividend Covered Call ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

2024