Sunny Day Fund

Emergency savings benefits program for a modern workforce

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What the 2021 Child Tax Credit Means for Your Employees (& How You Can Help)

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Child Tax Credit 2021

Rarely do policy and employee needs collide to create truly meaningful financial change. 

But the 2021 IRS Child Tax Credit (CTC) offers a once-in-a-lifetime chance to get savings right. 

In an unprecedented move, the United States Congress passed legislation to provide relief for all parents of children ages 0 to 17.  For 39 million American households and 65 million children, we estimate that the $250-$300 per child monthly tax credit will represent a median income boost of 8-15%.  

That increase will help parents address food insecurity, pay for child care and meet other financial needs.  

For HR managers and employers, the expanded tax credit should create a sense of urgency — urgency to enable their employees and their families to multiply the credit’s impact and achieve company-wide well-being goals. 

In short, now that parents have the capacity to save, it’s time for employers to provide them with the capability to follow through with an employer-sponsored savings program. 

What is the Child Tax Credit 2021?

The tax credit for parents is not new, but the 2021 Child Tax Credit Relief Bill is revolutionary.

The credit is normally available when taxes are filed, but advance payments started this month and go through December in response to the financial effects of the pandemic. Families can claim the remainder of their money when they file their 2021 tax returns next year. 

On July 15, the IRS started sending $250-$300 monthly Child Tax Credit (CTC) payments to eligible low-to-moderate income households. 

Here are key facts from the Tax Policy Center about the credit:

  • The tax credit is fully refundable (although parents should be aware of certain stipulations). Even families who earned $0 in 2021 may still be eligible.
  • Unlike the 2020 credit, it covers children who turn 17 in 2021. 
  • The annual child tax credit is up to $3,000 for ages 6 to 17 (up from $2,000) and is $3600 (up from $2000) for under 6.

Single taxpayer parents qualify for the full child tax credit amount if their adjusted gross income (AGI) is $75,000 or less (that amount lowers for incomes above $75,000 and phases out for incomes over $240,000), as you can see in the graph below from the Tax Policy Center.

Parent employees now have the capacity to save.

Emergency savings is on everyone’s mind coming out of the pandemic. This tax credit provides extra financial capacity that meets parents’ desire to save and helps them achieve financial goals to support their children’s future. 

It positively challenges — and changes — the status quo. Forty-seven percent of low-income adults say they are usually not able to save (vs. 25% of middle-income adults and just 8% of upper-income adults).

These same adults must often turn to payday loans and credit cards to access immediate cash, creating a costly cycle of debt. 

But unlike high-interest credit options, the tax credit money is unrestricted and offers a free source of liquid cash. This means that nearly 39 million households, or most American families, finally have risk-free money to save for their kids — for everything from emergency daycare to school supplies to future college tuition. 

For Marla Snea, a 52-year-old mom who is battling cancer and living on Social Security benefits, the money will make all the difference for her and her 14-year-old daughter. “Two hundred and fifty dollars, to me, is like handing a pauper a million,” says Snead. “It is going to help me so much. I mean, even Christmas – I might be able to get my children Christmas.”

Stash found that 57.5% of families are planning to save the child tax credit, placing the money in a standard savings account. 

And studies from the last stimulus payment prove that parents will follow through. On average, households used or intended to use 34% of the stimulus check to pay down debt and saved 42% of the stimulus payments they received from the most recent COVID-19 relief bill in April.

Parent employees can better plan their monthly finances.

Seventy-two percent of low-to-moderate income families who make less than $50,000 per year live paycheck-to-paycheck, with 33% struggling to pay their bills, according to a 2021 study by LendingClub.

Not surprisingly, the majority of income goes toward expenses rather than savings. 

The tax credit will allow these families to plan for the future, rather than focusing on staying afloat day-to-day. 

“Getting part of the credit as monthly payments is a boon to low-income families, which often struggle with fluctuating incomes,” says Timothy Flacke, executive director of Commonwealth, a nonprofit group that focuses on financial security. “This is a really, really big deal. They can make financial plans around it.”

And according to Schwab’s 2019 Modern Wealth Survey, 56% of people who plan their finances feel “very confident” they will reach their financial goals (as compared with only 17% of non-planners). 

The tax credit offers savings capacity that was previously out of reach to this underserved population. 

Enable parent employees to save with a dedicated program.

Now that parents have the capacity to save for their families, employers can provide the capability to act by offering an employer-sponsored savings program that rewards employees for their resilient savings behavior. And according to AARP Research, 9 in 10 working adults are asking for emergency savings as a benefit.

Sponsor a standalone FDIC savings account for your employees to automatically contribute part of their tax credit, even if it’s just $20 per month. The money is then easily accessible for emergencies and parents can create a financial safety net for themselves and their kids.

Consider it a unique way to multiply or magnify the impact of the CTC for your employees and their families. 

A structured program encourages the habit of saving through rewarding positive saving behaviors, which lays the groundwork for long-term financial well-being.

With stimulus checks + these child tax credit payments, this period in time is a rare reset button on finances. But the behavior to save still needs to be developed, and that’s where employers have the opportunity to crush it.

And as you help your employees save and lower their financial stress, you also help your company with better retention, productivity, and well-being. It’s a win-win situation for all involved.

Take advantage of this unprecedented opportunity to help your employees save.

By leveraging the Child Tax Credit 2021 and people’s own desire to save, leaders can lower financial vulnerability, improve productivity and retention, and achieve their impact goals. 

Want to help your own employees save and improve their finances? At  Sunny Day Fund, we offer a customizable employer-rewarded savings program. With high voluntary enrollment and high return on investment, the program is a powerful way to become an employer of choice – especially for your frontline workers. 

Reach out to us at contact@sunnydayfund.com and ask about our special 2021 Child Tax Credit promotion!

Do You Believe in DEI Initiatives? It is Time to Follow Through

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DEI initiatives

By now, DEI (diversity, equity, and inclusion) should be more than just a buzzword for companies. And, on the surface, it looks like progress is being made.

For example, LinkedIn data shows there has been a 71% increase in worldwide D&I roles in the past five years.

But while many companies and HR leaders would agree that DEI is important, around 80% of companies are just going through the motions and not holding themselves accountable when it comes to DEI initiatives.

At Sunny Day Fund, we hold to the belief that sustainable DEI change requires both commitment and deliberate action; closing the gap to turn the intangible into actionable DEI initiatives and supporting equity and fairness in the workplace.

The gap with DEI initiatives

Companies aren’t seeing DEI change because there’s a “wide disconnect between doing DEI work and valuing/understanding DEI work,” according to Wharton management professor Stephanie Creary.

For example, eighty-one percent of organizations say they are focused on improving diversity and inclusion. However, only 42% of the U.S. companies surveyed have publicly documented commitments to racial or ethnic equality.

This problem stems from the fact that employers treat DEI efforts as unrewarded peripheral work rather than core, merit-worthy initiatives. These initiatives – such as well-being programs and creating DEI positions – look good on paper, but it’s often easy to miss the real disparities or measure success of initiatives.

The glaring racial wealth gap is an example of the disconnect with DEI initiatives. It manifests itself with employers and their savings benefits. According to the Employee Benefit Research Institute’s (EBRI) 2021 Retirement Confidence Survey: A Closer Look at Black and Hispanic Americans, participation in retirement savings is roughly the same across race/ethnicity and income.

But the same study also reveals that actual total savings and investments are very different between different racial demographics.

Forty-five percent of all low-and-median-income workers have less than $1,000 in savings, which is problematic. But the situation is even worse for Black and Hispanic Americans, and doesn’t improve at the same rate as other demographics (even with higher incomes).

Similarly, the Federal Reserve finds that, on average, White families have eight times the wealth of Black families and five times the wealth of Hispanic families.

And, according to Sunny Day Fund research, part of this disparity is explained by most people’s need for accessible money, which is tougher with traditional employee offerings like 401(k), 403(b), and Roths. All of these offerings carry restrictions, varying levels of penalties and fees, and administrative access difficulties.

You also see this story play out with emergency savings. EBRI, Pew Research, AARP Research, and so many others have uncovered that minorities have far greater difficulty handling financial emergencies (largely due to little to no emergency savings).

Unfortunately, current DEI initiatives aren’t yet addressing DEI issues like the wealth gap. Organizations have taken key steps in recognizing DEI as a priority and elevating dedicated leadership to DEI initiatives, but those initiatives need to be linked back to measurable impact.

Take action with these financial DEI initiatives

Operationalize your commitment to DEI by creating initiatives that are actionable, measurable, and evidence-based so that you make data-driven decisions to prioritize what works.

We recommend prioritizing financial inclusion. Financial initiatives are powerful catalysts for advancing racial equity and systemic change.

Here are three actionable, financially-driven DEI initiatives that can help you help your employees.

DEI initiative #1: Consider your employees’ opinions about their financial well-being.

The core concept behind DEI is that everyone has a voice.

“You’re not going to get the benefits of diversity, like more robust decision making and innovation, unless you actually have a culture where people can speak up,”  says Michele Parmelee, Deloitte Global’s deputy CEO and chief people and purpose officer.

Despite this fact, only 38% of organizations review engagement survey responses by race or ethnicity to understand any differences in experience.

Close the feedback loop and involve employees in financial well-being and other DEI solutions you’re trying to provide. Here are a few ways to do that:

  • Avoid a “top-down” approach when it comes to DEI. This approach doesn’t foster a culture of commitment when leaders are telling employees what to do.
  • Incorporate conversations around DEI budget and resources into entire-executive meetings and share what efforts are being made with HR. 
  • Introduce engagement surveys and scores such as financial well-being surveys, which we offer at Sunny Day Fund, that measure the employee experience across diversity and inclusion factors. Share with employees how this information will be used and follow through.

Also, hold senior leaders (including CEOs) accountable for DEI outcomes instead of HR managers and ensure that they’re involved with behavior-based DEI training.

These efforts pay dividends. According to an Achievers study, almost 90% of employees say there’s a high level of inclusion at companies where there’s a strong culture of recognition.

DEI initiative #2: Offer emergency savings as a benefit.

Things like 401(k) personalization and investing access are critical to DEI efforts, but in order for employees to reach longer-term financial goals, they must first lay a solid emergency savings foundation.

And emergency saving benefits are what people overwhelmingly support, which builds on initiative #1. According to AARP Research, 9 in 10 working adults support emergency savings as a benefit.

This also makes sense on a holistic program level, where you can break down barriers to access and participation for employees who crave a stepping stone to retirement savings.

The support for workplace emergency savings programs is consistent across demographic groups, no matter the gender, income, age, or race/ethnicity.

“Where else do we get that level of consensus in the present-day world?” asks Sid Pailla, CEO of Sunny Day Fund.

To meet this request, enable direct-from-employer contributions into an FDIC-insured savings account for individual employees.

For example, at Sunny Day Fund, we help employers with simple payroll set up to allow automated employee and employer contributions into a standalone FDIC-insured savings account with no minimums or penalties. Better yet, it removes friction and reduces fear of access with fast, penalty-free, and stress-free withdrawals.

This employee benefit has proven success. $50 is the typical employee contribution per paycheck, with balances exceeding $400 after just four months.

The takeaway: accessible money and cash flow matter to your financially underserved employees and an emergency savings program is one way to level the playing field.

DEI initiative #3: Reward savings behavior and outcomes.

Give meaningful economic incentives for individuals who want to build emergency savings by enabling them to earn rewards for their saving contributions and balances.

“From a systemic and behavioral economics perspective,” Pailla says, “there has been no economic incentive for anyone to save for emergencies before now because the market interest rates have been close to zero for almost 15 years. So other than fear, there was no real economic motivation. What if employers can be a part of the source of that incentive, enabling the underserved or underbanked to build liquid wealth?”

Sunny Day Fund enables employers to do exactly that with customizable, quarterly rewards into employees’ standalone FDIC-insured savings accounts, reinforcing resilient savings behavior. Employers typically invest $150-$600 per year per employee based on configuration, including rewards, taxes, and fees.

So how are organizations funding their reward contributions? One way, according to Sunny Day Fund research, is that about a third of employers may be sitting on accessible excess cash reserves from their self-funded health insurance plans. “And let’s not forget that lots of companies have made a commitment to match retirement savings, but as the data shows, that match is, unfortunately, being left on the table by low and median-income employees,” he says.

With this initial investment, companies are also estimated to realize savings themselves due to better retention, productivity, and well-being. For example, a company using  Sunny Day Fund experienced a roughly 20% higher retention rate compared to industry peers, which is remarkable, especially in this tight labor market.

Finally, measure engagement. “From the employer perspective, if we’re viewing inclusion and equity as the ways that we want to engage employees, we have to get to a point where everyone participates,” Pailla says.

Rewarding all employees financially and equitably for saving any amount, large or small, is a way to make workers of all income levels feel included and invested in the success of their organization.

Take deliberate action to support DEI

Making workforce financial well-being a priority is an opportunity to walk the walk with DEI, proving to stakeholders that you both understand and champion diversity, equity, and inclusion outcomes.

Learn more about how Sunny Day Fund is committed to helping ALL 152 million hardworking Americans achieve financial well-being starting with emergency savings, and how you can use our program to bridge the financial well-being gap within your organization.

Reach out to us contact@sunnydayfund.com today and discover our customizable employer-sponsored savings programs.

6 Reasons to make an accessible savings a priority

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You may have already read Daniel’s story, which illustrates one of the many reasons individuals are trying to build accessible savings (you can call them emergency savings or personal savings too). In short, it comes down to the idea of dignity and self-determination, not just preparing for the unexpected.

But if you’re an employer, why should you provide accessible savings as a benefit? Here are six simple reasons why:

1.     Saving works – and employers know this.  Companies are already offering benefits to cover retirement savings, health savings, and education because they know their employees are thinking about their futures. But here’s the difference: this alphanumeric soup of savings benefits is tough for employees to navigate and comes with many restrictions and penalties that may hinder someone who wants to… just save! Having a simple, accessible savings benefit invites everyone to put money away for their personal goals and, yes, an emergency fund too.

2.   Employees are loyal to companies that invest in them. Emergency savings and personal savings are top of mind, especially for folks who are focused on achieving financial wellbeing in the near-term. According to several studies, providing similar benefits have led to better and longer retention. It’s simple to understand why – as one individual told us, “when a company invests in me, I am willing to grow my career with them.”

“When a company invests in me, I am willing to grow my career with them.“

Frontline Employee at a Healthcare System

3.    Accessible savings creates more reliability for companies. Having cash on hand thanks to a savings program matters, especially when a car breaks down or there’s a home emergency and people can’t get to work. We’ve often heard from general managers and HR managers that shifts go unfilled when workers can’t show up to work, causing production issues and undue stress for those who have to cover the shift. Ensuring that workers have savings that they can access easily for those moments helps address unintended tardiness and absenteeism.

4.     A less stressed workforce is more productive. We’ve all heard stories about how stress impacts productivity, but did you know that financial matters or money issues are the TOP source of stress for workers? Even with COVID, people are first thinking about how they’re going to make rent and take care of their families, and then thinking about their personal safety. That stress travels with employees to the workplace, where they may make costly accidental mistakes on the production line, during a delivery, or during a health procedure – whatever the work may be.

5.     Employers can lead the way toward greater workforce financial security. According to AARP, nearly nine in ten people said they would save towards an unrestricted rainy day fund if the employer to offer it as a benefit and contribute a small amount. That staggering potential participation rate focused on near-term financial needs – not just retirement – demonstrates that Americans are already thinking about their personal finances. They just need some help to actionably achieve their goals. Employers have an opportunity to engage those existing sentiments and weave them into company culture.

6.     Helping employees save creates a positive cycle that benefits everyone. People build accessible savings so they can be prepared for whatever comes their way, rain or shine, rather than growing a pile of money indefinitely. Researchers at Aspen Institute’s Financial Security Program talk about this preparedness and routine withdrawals from savings accounts as “The Cycle of Savings”. When employers actively help their employees work towards these emergency savings and personal savings goals, employers increase workforce financial security while building affinity.

These are just six of many reasons why employers should equip their employees with accessible savings. Convinced that you should be offering Sunny Day Fund™ to your employees? Contact us and stay tuned for more posts from our team as the Sunny Day Fund™ community continues our savings journey.