Contact Sales
Depending on where you are and whom you ask, employee benefits have either been around for centuries (Augustus Caesar offered his soldiers pensions in 13 B.C.) or for a few decades. Many of the benefits that modern workers receive as part of their compensation today were initiated in the 1940s, when companies were competing with one another to try to attract quality workers in a post-WWII environment.
The need to attract productive, efficient workers hasn’t changed, and many organizations now offer perks above and beyond health insurance and retirement savings: There are benefits for emergency savings accounts, gym memberships, unlimited time off, tuition reimbursement, and many more.
Just like everywhere else in modern society, technological advancements have drastically changed the ways in which employers offer financial wellness benefits, including workplace emergency savings accounts (ESAs). The advancement of technology and its impact on benefits have helped create more effective programs that can be more easily customized for each individual worker.
Workplace ESAs are one way for employers to help their staff members create a financial safety net. People have been saving money for unexpected expenses for as long as savings accounts have been available, but it’s only in the past few years that employees have had the option to build emergency savings with the direct help and support of their employers.
A workplace ESA is linked to payroll accounts, and workers can designate how much money from each paycheck they’d like to save. The most effective workplace ESAs are easily accessible, allowing employees to withdraw the money whenever they need it.
Before the workplace ESA, saving for an emergency was entirely up to every individual. Many people kept emergency savings in their own homes in cash: stashed in a cookie jar, under a mattress, or somewhere else they hoped would remain undisturbed (and mostly forgotten). If they wanted an account in a bank, savers had to educate themselves on the need for emergency savings, decide how much to save, open the account, and then regularly transfer money into the account. While today we are familiar with using apps to initiate automatic transfers, a few decades ago, this process involved submitting paperwork to open the account, followed by periodic manual withdrawals from one account and deposits into the emergency fund.
Fintech has streamlined the process of saving for an emergency. With many banking apps today, if a user already has a checking account with the institution, then opening a new savings account is as easy as clicking a button, naming the account, and transferring money from the primary account. Financial technology also allows users to transfer money between accounts and set up recurring automatic transfers at regular intervals.
It’s also much easier for savers to educate themselves about the need for emergency savings, how much to save, strategies for budgeting and cutting costs, and other financial topics that have become critical for financial wellness in today’s world. The Consumer Financial Protection Bureau has pages and pages on its website designed to explain complex financial ideas in simple terms and provide guidance on the best way to save. In the private sector, companies like NerdWallet and Bankrate provide a wealth of free financial advice and education to anyone who wants to learn.
Fintech has provided more control and deeper insight into ESAs for both workers and employers. Setting up a workplace ESA is simple, involving just a few short steps. Savers can access the money when they need it, either through transfer to a different account or withdrawal, and they can see how much they’ve saved and change their contributions whenever and wherever they choose.
Financial technology has become helpful in ways that go well beyond the convenience of payroll deposits and instant transfers. Behavioral insights offer the ability to better understand how individuals are using those programs and personalize different features for them, which can help encourage more consistent saving activity.
For example, setting goals and then meeting them can fuel good savings habits in many people. If employers understand this form of self-competition and gratification, then they can craft workplace ESAs with built-in features that allow users to set their own goals. Offering bonuses or other incentives for meeting those goals is another way that organizations can leverage behavioral insights. Breaking down savings to daily amounts (as opposed to monthly or annual) can make them less overwhelming and help employees more effectively track their progress. Targeted messaging that motivates savers to pay attention to their accounts can also be useful. When employees get a raise or receive a bonus at work, an in-app or email notification can ask them whether they would like to funnel some of that “extra” money into their ESA.
Accountants have been using data analytics and decision support to help them evaluate large data sets, identify any patterns or trends, and determine which insights can help their clients plan more effectively for the future. These tools are also available for workplace ESAs, and being able to visualize and grasp how individual behavior scales to groups can give employers the ability to better support their workers.
Predictive analytics can flag possible financial challenges based on current behavior or trends. If the aggregate balances in workplace ESAs are decreasing instead of increasing, this indicates that more people are experiencing financial emergencies — whether due to inflation, a swath of major life changes (such as marriage, divorce, or bringing new children into the family), or other potentially predictable factors. Understanding when employees might be feeling additional financial pressure can give organizations the ability to provide proactive support for their workforce, including education.
Decision support tools and systems are another form of technological advancement that allow users to evaluate different courses of action and model outcomes. They incorporate vast amounts of data as well as risk and reward variables to provide insight for the decision-maker, helping them make a more informed choice.
Workplace ESAs are one part of a holistic financial wellness benefits package that should also include other savings plans, such as retirement savings or health savings accounts (HSAs). Retirement plans perform best when employees can regularly contribute to them (often with an employer match) and then leave them untouched until retirement. Early withdrawals from retirement plans are discouraged specifically because they undermine the effectiveness of the benefit.
By offering a workplace ESA in conjunction with a retirement plan, employers can provide workers with a different, better option than an early withdrawal from their 401(k). Access to an ESA has been shown to reduce the likelihood of a retirement plan withdrawal or loan. The money saved in an ESA can be withdrawn whenever the employee needs to meet an unexpected financial need, which allows their retirement savings to continue to mature and grow. An HSA (which is paired with a high-deductible health care plan) gives employees a chance to set aside pre-tax payroll funds that can be used to pay for health-related expenses, including a medical emergency.
All three of these savings programs can work in tandem to allow employees to maximize their savings dollars and use the correct account for their current financial needs. Financial wellness and education platforms then help tie the benefits ecosystem together by clearly explaining the differences between these accounts and how they can each be used, in addition to teaching money management and budgeting skills that can help employees better plan and navigate their finances.
Financial technology has allowed employers to increase the security around all aspects of their own finances, including payroll information. Data is encrypted, bank account information is protected, and employee privacy is shielded through the use of new technology platforms and standards.
Technology also helps to ensure compliance with federal and state regulations, flagging benefits setups that don’t align with the current guidelines. For example, if a workplace ESA is set up under the regulations set forth in SECURE 2.0, and employers are attempting to add a matching bonus to the workplace ESA instead of to the 401(k) or other retirement savings plan, fintech and benefits platforms can notify or alert the benefits manager that the plans need to be adjusted.
It’s easy to malign technology when it doesn’t work, but the benefits and savings advancements that have become possible as a result of fintech are simplifying financial wellness for employees across the board.
The data collection and analysis, personalization and behavioral insights, integration and security, and other improvements to financial platforms have simplified the savings process from the employees’ standpoint. This means that saving for an emergency, especially through a workplace ESA, has never been smoother, more effective, or more accessible than it is today, and we have technology to thank for these gains.