More big companies helping workers auto-save to build emergency funds

By Sarah Min

/ MoneyWatch

American families struggle with financial insecurity

Some Americans who want to sock away money to cover emergency expenses now have help: A growing number of companies are offering their employees an emergency savings benefit. Kroger, Levi Strauss and SunTrust Banks are among the crop of employers that The Wall Street Journal recently highlighted as offering a rainy-day savings fund.

The demand is certainly there. Nearly three-quarters, or 71%, of employees said they wanted help building emergency savings, according to an AARP survey conducted last year. Employee interest in the benefit has grown even as the U.S. has enjoyed a decade of solid economic growth.

But with wages nearly stagnant, nearly 40% of American households struggle to cover an unexpected $400 expense, according to a May report from the Federal Reserve. It found that even "relatively small, unexpected expenses," such as car repairs or broken appliances, as opposed to a medical emergency, can be a hardship for many families without adequate savings.

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Employer matches

The corporate emergency savings programs are varied — some "game-ify" the experience by offering prizes — but they typically offer some kind of employer match. Clothing maker Levi Strauss has a savings program open to all hourly wage employees that offers a dollar-for-dollar match of up to $240 in six months, or a $40 monthly cap. The program covers about 1,300 Levi employees.

"Saving is something that everyone wants to do, but most people want to start to do tomorrow," said Leigh Phillips, CEO of the fintech nonprofit EARN, which administers the savings benefit for Levi. "The more we provide incentives for employees to save for work, the better off they'll be."

EARN said in a report that about two-thirds, or 63%, of savings accounts connected to the nonprofit platform from Levi were first-ever accounts. Phillips also said the company found that employees on average saved about $700 in six months, far more than the mandated $240 six-month cap, suggesting that workers are inspired to build a habit of saving once they get started.

Some millennials are using their 401(k)s to pay down debt

For companies, an emergency savings benefit can help retain employees, while contributing to higher worker productivity, lower turnover and also preventing premature withdrawals from 401(k) plans.

After offering its own employees $1,000 toward their emergency savings, SunTrust in 2017 rolled out a financial wellness program to two dozen companies, including Home Depot, Delta Airlines and Waffle House. BlackRock, the world's largest institutional investor, in February pledged $50 million to help employees at other companies build emergency funds. And workplace insurance company SafetyNet in November launched Cookie Jar, an employer-sponsored financial wellness program that helps employees save money by rounding up purchases and depositing the change into a savings account.

"They realize their employees' financial stress affects their bottom line, and that's a source of the uptick in interest in emergency savings programs," said Catherine Harvey, senior policy adviser at AARP Public Policy Institute.

Automatic enrollment is key

Skeptics of the savings benefits say companies could do better by simply offering employees higher pay, given that wage growth has generally been weak for decades. However, AARP's Harvey said even higher-middle-income households often don't have enough emergency savings to deal with unexpected expenses.

"Psychology plays a role in that, but there are also no systems and structures to incentivize savings, versus savings for retirement. Short-term savings are something people have to up and do on their own," Harvey said.

Despite the bubbling participation in the benefit, Harvey said emergency savings benefits will only truly take off when employers roll out automatic enrollment in programs. "We really think that employers have a vital role to play here, the moment of pay is so powerful," Harvey said. "If we say that saving for emergencies is one of our priorities, why not do that on autopilot and do it for every paycheck."

First published on June 19, 2019 / 2:54 PM

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