Sunny Day Fund

Emergency savings benefits program for a modern workforce

Emergency Savings

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!

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.

Saving for emergencies: Daniel’s story

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We often hear statistics that simplify the story of a person down to a single number. We do that too – we share the statistic from Marketplace-Edison Research that finds that nearly half of Americans would have trouble coming up with $250 for an unexpected expense. But people are more than numbers, and so I wanted to share a story that reflects our learnings from hundreds of conversations we’ve had over the years.

For the sake of anonymity, we’ll refer to this person as Daniel.

Daniel is in his early 30s and has made a good life for himself between his fulltime job and a side gig he’s picked up along the way. Daniel loves the people he works with and admires the company he works for, and believes that corporate leadership has tried to do right by its people. Daniel makes a livable wage, but it’s exactly that – it allows him to live, not necessarily thrive. He’s able to keep up a car, which he needs for his commute; has decent health insurance from the company; and also saves a tiny bit for his retirement, because he hears that’s the right thing to do. Daniel lives outside a small city, and he shares an apartment with a friend. Daniel also has always been devoted to his family.

Daniel was swimming along just fine, and then someone in his family had a medical emergency. He needed to move back to his hometown and financially support his family.

Daniel had tried to save a bit of money when he could, but it wasn’t regular and it was intended for his dreams. And so even after dipping into his limited savings to cover his family’s bills, he needed more money. Daniel could’ve continued adding to his credit card balance, but knew it wasn’t wise, and he was trying to avoid falling into the predatory cycle of payday lending. So, he decided to take some money out of his retirement savings.

But getting his hands on that money was tough. Daniel started bouncing around his company’s HR and Payroll and Benefits departments, trying to figure out how to tap into the precious savings he’s built up – all to help his family get through their crisis. . Three days after the latest hospital bill was due, he found out that he wouldn’t even receive the money for another week, and only after paying a penalty of 10% plus taxes. At the time he needed cash the most, he had to deal with paperwork and penalties.

Easy access to savings is critical in case of emergencies.

Daniel, thankfully, eventually received that money and floated by in the meantime with a bit of help from his friends. But without that help, Daniel and his family were facing not having enough food in the fridge, missing bill payments or even eviction. Potentially, Daniel could’ve been left jobless as a result of his being distracted by these “personal issues.” Daniel’s story is being repeated thousands of times in every community across the country – people are doing the best they can, but one disruption sends them spiraling down a dangerous path.

When I asked Daniel about what he wished would’ve happened, it was clear – he didn’t want to be in that position in the first place. He wanted options that fit his lifestyle and helped him build up some protection from the unexpected. Beyond that, he wanted the opportunity to save for what he wanted out of life – a vacation, a grad school program, a more reliable car. Daniel wasn’t interested in becoming rich, but he did want to be secure enough  to be there for his family in their time of need – and he wanted to do that on his own, with his dignity intact.  

And that’s at the heart of why people want to save – this idea of dignity and self-determination. I have been finding that when we talk with people and hear their stories, people already fundamentally know that savings is important. Sure they need to save because there are just so many things that can go wrong, like the family emergency in Daniel’s case. But this impending sense of doom isn’t the reason that people want to save. People like Daniel want to save because he’s proud of the life he’s built and dreams for his own future.

And it’s for those people – people like Daniel – that we’ve built Sunny Day Fund™.