Employee Building Emergency Savings Funds Is Also Good For Businesses


There’s a growing trend in the workplace that’s an all-around win: employers are helping their staff build emergency savings. This helps the employees, of course, and benefits the company, too, through increased retention, loyalty, productivity and even safety and with reduced hiring and recruitment costs.

Emergency Savings
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The Wall Street Journal recently noted an increase in companies trying new methods to help staff weather unexpected emergencies and build a more secure financial future. Emergency-fund building can come in various forms: splitting direct deposits to savings accounts, arranging low-interest loans, expanding employee disaster funds and more. Some companies are using cash and other incentives to help employees build savings while others are allowing employees to put part of their paychecks directly into rainy-day funds built off their 401(k) plans; financial emergencies are threatening not only those without savings but also those with something put away as workers increasingly dip into funds they had planned to use for retirement.


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“Employees withdraw 30 to 40 cents of every dollar that goes into a 401(k) account before retirement, often to compensate for shocks to income, according to researchers at the Federal Reserve and the Internal Revenue Service,” the Journal reported.

“This leakage threatens to reduce the wealth in U.S. retirement accounts by about 25% over 30 years, according to an analysis by Boston College’s Center for Retirement Research. The center says half of U.S. households are at risk of being unable to maintain their standard of living in retirement.”

Employers also are “concerned about the impact of financial stress on productivity,” the Journal notes; companies testing initiatives including Levi Strauss & Co., SunTrust Banks Inc., and Kroger are seeing positive returns on even small investments in their employees.

A trucking company even found a reduction in accidents when workers were less distracted by worry about finances, University of Pittsburgh professor Carrie Leana wrote in the spring edition of the Stanford Social Innovation Review:

“Anxiety about debt and financial stability can severely reduce the productivity and health of employees, which can hurt a company’s bottom line. Businesses, government, and philanthropic organizations should embrace the case for improving the financial well-being of workers,” the Pittsburgh study found.

With millions of hourly workers in the U.S. living with next to nothing in their savings accounts, the need to act is urgent. A bipartisan group of senators has introduced legislation to make it easier for employers to automatically enroll workers into optional emergency-savings accounts. And BlackRock this spring announced a $50 million emergency savings initiative aimed at fueling innovation that will allow millions of people living on low to moderate-incomes to establish a stronger financial safety net.

We believe there are good problem-and-solution stories to tell on how emergency funds can make a difference for the workers and employers. One of the partners in the BlackRock savings project, the nonprofit financial innovations center Commonwealth is testing, piloting and examining the need and creative new answers; executive director Timothy Flacke provides perspective on this workplace trend.

Article by Timothy Flacke

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