It is no secret that benefits become even more important as the labor market tightens. Employers rely on benefits to retain current employees and recruit new ones. More importantly, they tend to search for new benefits that will give them the edge. Emergency savings funds are emerging as one of the latest and greatest new benefits.
An emergency savings fund is more or less a savings account facilitated by the employer as a benefit along the same lines as health insurance and a 401(k) plan. The benefit can be structured in many different ways, depending on what the employer is trying to accomplish.
We invite you to take a good look at emergency savings funds if you're planning to add to your current benefits package. An emergency savings fund benefit is a way to enrich your benefits package and offer your employees some much needed help.
Willing to Save
We Americans are woefully bad at saving. It has been that way for generations. We tend to pay our bills and then spend whatever is left without thinking about it. Some of us spend more than we should even before the bills are paid. But guess what? Survey data suggests that people are willing to save.
According to an AARP survey published in 2018, 71% of America's employees would be willing to actively participate in an emergency savings fund benefit through voluntary payroll deductions. Even better, 87% said they would participate if their employers offered a matching contribution.
We all know we don't save enough. And while many of us intend to save, things come up. All that money we had planned to have in a savings account at the end of the year never materializes. This is why an emergency savings fund benefit is so helpful.
Adapting to Their Paychecks
Helping employees save by way of a company benefit works simply because of how people handle their paychecks. In simple terms, people view their pay in two ways. They know how much they make annually as a value of the jobs they do. But they are more likely to look at their weekly take-home pay in terms of its value to their everyday lives.
What's most interesting about these two contrasting views is that people will adapt to their take-home pay. When it comes time to work out the budget and pay the bills, employees aren't considering their annual salaries. They only think about what they put in their bank accounts at the end of every payroll cycle.
As such, they will adapt to lower take-home pay. Let's say an employee agrees to a $25 payroll deduction from every biweekly paycheck. That employee will learn to adapt to receiving $25 less. He or she will probably not even miss that money. All the while, it is going into a savings account along with an employer contribution.
The benefit works so well that some companies are offering it in combination with financial training courses. For example, SunTrust Banks has a benefit program in place that combines employer contributions with financial wellness training. The company provides up to $1,000 in savings contributions to every worker who completes a personal finance course and sets up automatic payroll deduction for a savings account. They have already spent $18 million on the program.
It's clear that Americans need to save more. If employers can help them do that with an addition to their benefits programs, doing so is a good thing. An Emergency savings fund is a benefit that helps both employer and employee alike.