Workplace emergency savings programs (also known as emergency savings accounts / ESAs) are rapidly gaining popularity, particularly with the recent passage of Secure Act 2.0. According to Transamerica’s Prescience report, 40%-60% of employers are expected to offer workplace emergency savings or ESAs as a benefit.
So what should employers expect out of their employees when such a program is launched? We’ll talk about that and more in this post, hearing directly from the amazing employees saving for emergencies today. Specifically, we will highlight the significance of behavior-changing emergency savings funds that support financial well-being and increase employee retention.
Why are emergency savings accounts becoming a benefit?
HR professionals work tirelessly to set employees up for success, and employee feedback is a key metric of their efforts. A strong employee value proposition (EVP) is vital for attracting and retaining talent, as employees view the total rewards package as a reflection of the organization’s culture. So what are employees saying? By far, they’re focused on financial well-being.
How many times have we heard that dreadful statistic that too many hardworking Americans can’t afford a $400 emergency? This financial precarity and financial vulnerability deeply impacts employees’ ability to meet their financial obligations – and it also hurts mental health, lowers productivity because of cognitive load, and causes a scarcity mindset leading to retention issues.
Another way to think about it is what we receive as a typical recommendation from most financial advisors: have 3 to 6 months of savings for emergencies. However, our recent data shows that the majority of Americans have less than 3 months’ worth of savings. Nearly half of working Americans making $40K or less – representing the majority of our country’s workforce – have less than a month.
Traditional employee financial benefits often fall short in addressing this issue, and thus meeting their employees where they are. It’s no surprise retention and 401(k) loans remain an issue. To combat this, an increasing number of employers are now offering payroll-deducted savings – regarded as the top requested benefit in 2023. By prioritizing accessible and easy-to-use savings options, companies enable employees to build crucial emergency savings, leading to higher employee retention rates, lower instances of mental stress, and a happier workforce.
Emergency savings are designed to cover unexpected, urgent, and essential expenses. Their main goal is to protect you from relying on high-interest debt, such as credit cards, payday loans, or other unsecured loans, which could lead to financial hardship.
With saving for emergencies being a top priority, employees are now turning to their employer to help. Employers are now offering an automatic payroll-deducted benefit to jumpstart growing that extra cushion. So what factors are important for employees so they can save and achieve financial well-being?
Automate Saving for Emergencies Directly from the Paycheck
Have you wanted to build an emergency savings fund but didn’t know where to begin? Beyond lack of financial education, there is overwhelming choice and with scams one click away it can feel dangerous to seek out help. We understand that finding time in a busy day can be challenging, which is why automating emergency fund contributions into a new, secure, FDIC-insured savings account can be a powerful solution. This helps make saving part of the routine, while giving employees control over access without restrictions. Hear from Mariana, an employee at an auto services company, about how an automatic payroll-deducted benefit helped her jumpstart her emergency savings account.
“It was … like I didn’t feel that it was there. I mean I set up the contributions but it was automated and I mean it just happened with every paycheck so I just don’t have to worry about it. That I just kind of forget about it like I’m saving without even feeling like I’m saving. I just go to my account and just see that it’s growing.”
Mariana’s experience with Sunny Day Fund – an automated payroll-deducted emergency savings program – focuses on how easy and automated savings has become. Mariana was able to grow the balances in her separate emergency savings account without feeling the financial strain and time burden of actively making contributions. Her experience demonstrates how this behavioral approach to savings made it easier for her to create an emergency fund without impacting her lifestyle or worrying about unforeseen bills. As a result, Mariana enjoys watching her account grow in addition to being rewarded for saving thanks to her employer’s extra cash rewards.
Overcome Inaction Bias while Creating a Savings Culture
Meet Ty, an enthusiastic Sunny Day Fund Saver and employee at Alleghany Warehouse Company, an early adopter that we highlighted in a case study. Alleghany is a family-owned business in Richmond, VA, and manages warehouse operations for a Fortune 200 consumer packaged goods company. Hear how having an emergency savings program by Sunny Day Fund helped Ty, to a point he is empowered to achieve goals and enjoy experiences that felt unattainable.
“I know, if I didn’t have this account pushed to the side I know I wouldn’t have been able to do certain things. So it’s just like, it’s real big. When somebody new comes to the company and we explain to them all the different benefits of being able to work here. Sunny Day fund that like one of the first things, Sunny Day is one of the most thing I tell somebody.”
Ty’s testimonial emphasizes the importance of having an emergency savings account and how it helped him achieve his financial goals he otherwise wouldn’t have been able to accomplish. One of the biggest barriers to us following through on our wishes is bias for inaction – sometimes it’s just hard to do all the things that are needed to start saving, like opening a separate account, figuring out how much to save, making sure there are no hidden fees, and having a good, trustworthy experience. Sunny Day Fund bundles all of those separate actions and more into a simple experience for employees.
Ty’s gratitude for Alleghany offering Sunny Day Fund also comes across in his excitement as he shares the benefit with new employees. This celebration is tremendous – it creates a new element in workforce culture that embraces financial well-being as something that employers and employees value. Socialization is essential to fostering a supportive environment where employees can lean on each other as necessary.
Withdrawals from Emergency Savings Are a Good Thing!
A staggering 90% of employees surveyed express concern about inflation and escalating expenses, with almost half attributing financial worries to a decline in mental health. A few ways that those unexpected expenses driven by inflation or sudden events manifest include payday loans, credit card debt or 401(k) loans. But emergency savings can stem those bad events from the start.
“It’s hard to really, you know, pay bills and do things and really save money. Sunny Day has helped me out a few times, with a few things that I was planning on doing or you know, just trying to save.”
Deliver Service with Empathy and Dignity
Savers value empathetic and understanding service when it comes to addressing their personal financial needs, and not everything can (or should) be automated by a bot or an app. In our case at Sunny Day Fund, our team’s genuine passion for solving the problem is evident in their compassionate approach, driven by their own personal experience with financial precarity. Listen to Ty’s firsthand account of feeling valued and understood, which strengthens their trust in us.
“When like if I email somebody from Sunny Day Fund they get right back to me. You don’t get that type of treatment from other institutions, it’s like they’ll get back to you when they feel like it, but [Sunny Day Fund] get back to me first. And you know you make me feel like I’m important, you know and that’s the part that I will forever be grateful and I will forever tell anybody about Sunny Day Fund.”
At the core of the Sunny Day Fund is a commitment to providing service with empathy and dignity. But this shouldn’t be unique to us – any stakeholder that’s enabling financial well-being should focus on being people first. Ty’s positive experience with our customer success team, highlighting the quick communication and feeling valued as a Saver, is exactly what we strive to achieve.
Saving for Life Goals Means More Savings and Better Resilience
Our approach to saving recognizes that emergencies are just on part of our immediate financial lives today. Something that is a financial shock could be something that’s positive. For example, saving for a vacation or security deposit – these are known events, but when we look at how much these life events “cost”, it could feel shocking or out of budget. Saving for both emergencies and life goals also means employees are putting away more money on average, so if an emergency were to pop up, employees now have even more to count on, reprioritizing from their immediate goals. That life flexibility creates a positive light on an activity often driven by fear.
Let’s hear from Mariana again. Mariana shares how she’s saving for both emergencies and an invaluable, memorable trip to Mexico with her husband for the first time to visit her family.
“When my husband and I decided to visit my family in Mexico, my husband and I, we got married in 2021- but he had never visited my hometown before. So when we decided or planned the trip the first thing that I did is to set up my Sunny Day Fund so I could start contributing into my account. This way we could have like spend money or money to spend over there to vacation in.”
Savers not only prepare for emergencies but also pursue life goals and plan for special moments, from starting a family to buying holiday gifts. Mariana’s experience highlights the benefits of contributing to her account, allowing her to save for a meaningful experience. Financial well-being is about more than just preparing for unforeseen challenges and having financial security; it’s also about ensuring we have sunny days to look forward to – so we can achieve that financial freedom.
Present an Emergency Savings Benefit with Trust, Education, and Engagement
We can lean on technology to automate and bundle saving, payroll process, invitations and so much more – but building trust is crucial as we engage employees. We can build that trust through education resources, such as flyers or videos. We’ve found that employees especially appreciate in-person engagement where they can see how their peers react too.
Discover how Taurus, an employee at a bakery in New Jersey, learned about Sunny Day Fund through an on-site benefit fair hosted by their employer. This highlights the importance of effective communication and education in promoting financial wellness and employee benefits.
“I like the program, that everything that when y’all came for the seminar that you all were saying, it’s a good way to put money into savings.”
“Now with your experience with Sunny Day Fund, do you think it was a good choice for your employer”
“Yes, because they got a lot of employees to join Sunny Day Fund. And I’m trying to get more employees to do it too.”
Taurus’ encounter with our team members and fellow employees at a benefit fair demonstrates the power of employees supporting and encouraging one another to embark on their savings journey. As Taurus’ testimonial shows, when employees feel supported and motivated by their peers and the company’s benefits leaders, they are more likely to participate in the program and reap the benefits it provides. In case an in-person engagement is not possible, virtual through webinar or Zoom office hours are recommended.
Prepare for Workplace Emergency Savings by Listening to Employees
Workplace emergency savings and ESAs are coming, and total rewards and benefits leaders need to position their organizations for success during and after launch. Employees are the best resource for understanding what they want in an ESA program. This post highlighted a few factors that’ve been cherished by employees, featuring direct testimonials.
As you revisit their overall strategy for employee benefits, consider our value calculators or reaching out to our team to learn how an emergency savings program fits in and delivers impact to the organization and its employees.
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