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The benefits of emergency savings accounts for employees and employers
Key reasons to offer emergency savings accounts:
Emergencies happen all the time, yet many Americans don’t have enough savings to weather a storm. If your employees are experiencing financial uncertainty, it can lead to stress, decreased job performance, and missed work. While financial stress is nothing new, the COVID-19 pandemic made everything even more challenging.
An Emergency Savings Account (ESA) can help your employees become more financially healthy so they can focus on the job and be more productive. In the wake of the pandemic, ESAs are becoming more popular with employers who are looking to add benefits that will help attract and retain the best talent.
We discuss how ESA programs work, their benefits, and the reasons employers should consider offering them as part of their company benefits package.
Reason 1: Lack of savings
Experts recommend that families have enough savings on hand to cover 6-12 months of living expenses, yet many people fall well below that benchmark. According to a Federal Reserve Report, 4 in 10 Americans don’t have enough savings to cover a $400 emergency. 69% of Americans have less than $1,000 in savings
Having an ESA would make it much easier for individuals and families to save money for emergencies. An ESA sets aside funds that can be used for unexpected expenses.
Reason 2: The impact of COVID-19
While much of the coverage surrounding COVID-19 focused on the health consequences of the pandemic, we can’t overlook the financial impact on your employees. Many were let go or furloughed, while others had their hours cut. Even if your employees weren’t impacted, they likely have a family member that was.
A Pew Research Center survey found that around half of American adults say COVID-19 will make it harder for them to achieve their financial goals. For all of us who went through the economic crisis in 2020, it could take three or more years to recover.
A financial crisis can lead employees to take drastic measures that can harm their finances. Common solutions to money problems include taking out high-interest payday loans, maxing out credit cards, or withdrawing long-term savings/retirement accounts like a 401(k) or IRA.
Loans and credit card debt can impact credit ratings and interest rates, which will make it harder to recover and make big purchases such as a new car or home. Early withdrawals from retirement accounts usually can’t be done without paying hefty penalties and taxes.
An ESA can help your employees handle even a desperate situation like a pandemic, without making things worse.
Reason 3: Easy access to emergency funds
ESAs allow your employees to save money that can be used for all types of financial emergencies, from a health crisis or emergency home repairs to suddenly needing a new car. Deposits to an ESA are considered after-tax funds. Employees decide how much money to deduct from each paycheck and the amount is automatically deposited into the savings account. You can also choose to match a percentage of your employee’s contributions allowing your employees to make additional progress toward building their emergency fund.
If an emergency does occur, money can be taken out of the account at any time, without facing early withdrawal penalties or taxes.
Reason 4: Peace of mind
A lack of emergency savings can have a big impact on your employees’ peace of mind. If they’re experiencing financial stress, they often bring that insecurity and anxiety into the workplace. An ESA is an easy way to help your employees feel more secure while impacting your bottom line.
Health savings accounts (HSAs) and benefits like 401(k) plans have made it possible for employees to save for health emergencies as well as retirement. ESAs add another type of financial security so your employees can weather unexpected financial hardships. It’s one way to allow your team to have access to short-term savings, as opposed to retirement accounts that can’t be touched without early withdrawal penalties, fees, or taxes.
Protect your employees from financial difficulties with an ESA
An ESA is an effective way to protect your employees from financial disaster. Whether due to a global pandemic or a personal need, ESAs are a benefit that can reap unexpected rewards for valued team members in a time of need.
SecureSave is the first purpose-built emergency savings program. Both employees and employers remark on how simple the app is to use compared to other benefit programs. It's also much more affordable compared to other financial wellness benefits in the market.
SecureSave makes it easy to add ESAs to a company benefits program while securing the financial futures of employees. Email us today at info@securesave.com to talk about providing an emergency savings solution for your employees.