JULY 19TH, 2022
An emergency fund is money set aside — often in a savings account separate from a person’s checking account — to help pay for unexpected expenses such as medical or dental emergencies, unemployment, and home or auto repairs. Emergency savings can provide a major reprieve from financial stress, though a lack of savings can fuel financial anxiety.
People who use emergency funding to pay for these types of expenses rather than relying on credit cards, personal loans, or retirement withdrawals often can weather the financial storm because they don’t rack up interest, fees, or penalties.
However, building an emergency savings fund is difficult for many folks. The latest MagnifyMoney Savings Index found that nearly 1 in 5 survey respondents had contributed $0 to their savings in 2021. And while 48% — the biggest chunk of respondents — did save up to $5,000, even that amount might not be enough to cover a major life event.
For companies looking to differentiate themselves with a robust benefits offering, an employer-sponsored emergency savings program can give employees the tools — and confidence — to save for emergencies.
Even the most robust benefits plans often don’t account for the fact that health insurance and retirement plans alone aren’t always enough to help workers cover emergent expenses in times of economic instability. According to research from the Pew Research Center, fewer than 1 in 4 lower-income American workers have the savings necessary to cover three months of regular expenses — to say nothing of unforeseen circumstances.
And financial insecurity is a lot more common than you might think. More than 25% of American adults are either not able to pay their monthly bills or would not be able to pay them in full if they faced a $400 financial setback; another 36% have said they couldn’t easily come up with $400 if they were dealing with an emergency. All told, more than half of American workers are financially vulnerable.
This is important information for employers. According to a survey by John Hancock, 71% of respondents experienced symptoms of depression, stress, or loneliness over the past year. Of these respondents, 58% said they experienced stress due to financial problems.
And this financial stress impacts job performance. The same survey found that 40% of respondents said financial stress causes them to be less productive at work, while about 66% said they fret about their finances while on the clock. All told, John Hancock estimates that financial stress costs companies as much as $2,412 per employee in lost productivity and absenteeism.
All of these problems point to a tremendous opportunity for employers and benefits leaders. Almost 90% of respondents in the John Hancock survey said they would like their employers to provide financial wellness assistance. Employers who are in a position to provide savings and other financial wellness programs can set themselves apart in a challenging labor market.
Top employers are recognizing the benefits of boosting their employees’ financial well-being. This can entail partnering with banks to provide unique savings options, offering special accounts alongside traditional retirement plans, and beefing up workplace benefits with offerings like health savings accounts (HSAs) or a Paytient to cover emergency medical needs.
Here are a few ways to encourage financial wellness among your employees:
Encourage employees to focus on savings by creating and deploying step-by-step instructional materials on topics like household budgeting, spending, and cutting costs. Financial planning tools like calculators and templates, used in conjunction with your educational initiatives, will give your employees instant access to everything they need to turn ideas into action.
Companies that direct resources toward assisting employees with unexpected expenses as part of their financial programs are likely to be viewed by employees — existing and prospective — as leaders in offering the most in-demand benefits. You could start an emergency savings fund for each employee, or you could invest in a benefit that provides access to emergency funds at a fraction of the cost.
HSAs can help any of your employees covered by high-deductible health plans save and pay for healthcare-related costs while taking advantage of tax breaks. You might also negotiate partnerships with banks, credit unions, or taxable trusts to offer access to third-party emergency savings accounts. Both of these benefits allow employees to build a safety net — though they must feel financially secure enough to make regular contributions to these accounts.
Last but certainly not least, you could offer a benefit like Paytient. This approach opens up instant access to funds employees can use to cover out-of-pocket healthcare costs. With Paytient, employees can divide expenses of any size into manageable payments without paying interest or fees. It costs only a few dollars per employee per month to implement a benefit like Paytient, and it can deliver a massive win for employees while generating significant ROI.
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