From the economic impacts of the Covid-19 pandemic to record-high inflation to interest rate hikes from the Federal Reserve, the last several years have been plagued with financial unrest.
That may explain why only 48% of U.S. adults say they have enough emergency savings to cover at least three months’ worth of expenses, according to a new Bankrate survey. That’s nearly unchanged from 2022, when inflation reached a 40-year high.
For many Americans, this lack of reserves is a source of stress. The Bankrate survey found that a full 57% of U.S. adults are uncomfortable with the amount of emergency savings they currently have.
HR leaders have taken note. In fact, a growing number of employers now offer ways to help employees bolster their backup savings as part of their overall financial wellness benefits. If you’re interested in being one of them, read on. What follows are six moves that can help your organization build an emergency auto savings program that works best for your employees and your company.
1. Evaluate Employee Needs
The pandemic demonstrated that a huge percentage of employees in all salary ranges weren’t financially prepared for what was to become one of the most unprecedented periods of history.
This lack of preparedness added to an already stressful situation (working remotely, worries about health, child and elderly care needs, et cetera). Even as we move beyond the pandemic, however, employees are still on edge. SoFi at Work’s Future of Workplace Financial Well-Being 2022 study found that 75% of U.S. workers are facing at least one source of major financial stress. What’s more, employees are spending over nine hours per week while at work dealing with issues related to their financial situation (that adds up to a full 12 weeks of work each year).
Adding an emergency savings plan can help employees alleviate a significant amount of financial stress and provide a solution to the lack of short-term savings. This might be especially appealing for younger members of your workforce who may have fewer resources to rely on than older employees.
To determine how effective an auto savings program will be for each segment of your staff, you might think about creating a preliminary survey of employees to see what they feel they need most from a short-term savings plan.
Consider the following questions:
• Will you participate or do you feel there are already too many demands on your paycheck?
• Are you more likely to join if the company offers a match or initial contribution?
• Will you gravitate to emergency savings in lieu of long-term retirement savings?
• Do more accessible after-tax savings in a 401(k) account that can be used for emergencies appeal to you?
• Do you think a separate emergency auto account will help you think about saving for specific needs?
2. Check Out the Competition
A good next step is to determine what competitors are offering their existing talent and new recruits in the short-term financial wellness arena. For example, is an emergency auto savings program common among companies competing for your talent? Do most competitors offer a match or contribution to get employees, especially new hires, started?
Use the results of this data and the survey of employees to devise the most effective program for your employees (see below) and, importantly, to help convince team members and management why an emergency auto savings program is right for your company’s total rewards strategy.
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3. Determine the Impact of an Emergency Savings Program on Your Total Rewards Strategy
In recent years, you’ve likely had to shift or alter some of the components of your total rewards strategy, including compensation, benefits, flexibility, performance recognition, and career development. In light of those changes, where does an emergency auto savings benefit fit into the new reality? How does it fit with your HR financial wellness goals and business strategy?
The answer is likely very positive. It’s hard to imagine a total rewards strategy that doesn’t have a place for emergency auto savings, especially in light of recent times.
That said, it’s important that you structure and implement this benefit in a way that not only fills a need but enhances your overall strategy to retain, attract, and maximize talent. Be aware that when you add an important benefit such as emergency savings, you may shift the balance in your employees’ financial well-being focus from long-term to short-term goals.
As you implement the plan, you may need to realign your employee value proposition and total rewards strategy to encompass current and immediate needs while redoubling your efforts to educate and motivate employees on long-term financial wellness goals such as saving for retirement and healthcare costs.
4. Select the Solution and Roll Out Best for Your Goals
At SoFi at Work, we’ve found that selecting the right solution is critical to the utilization and effectiveness of every benefit in your total rewards strategy. Following the McKinsey framework can work well for all types of benefit rollouts, including emergency auto savings programs. These four principles can also help ensure benefit rollouts are integrated into your business strategy.
Choose Partners Wisely
Almost every benefit entails an outside partner to help administer and execute. Automatic emergency savings is no exception. Look for credible partners that can provide expert support and advice to a wide variety of employees with varying financial needs. For emergency savings, you’ll want to find a bank, credit union, or other financial institution that offers a low-cost, easy-to-use platform, like SoFi At Work’s Emergency Vault or open a Checking and Savings account with SoFi.
Focus on What’s Feasible
Make the program feasible to launch, which will help you make meaningful progress for employees in the short term as you lay down the foundation for long-term initiatives. This is key with emergency savings rollouts because by helping to relieve some short-term financial stress, you allow employees to focus on long-term goals sooner rather than later.
Make It Sustainable
Sustainable programs are able to flex with your business over time and during uncertain business conditions. Can your emergency auto-save program survive through the next period of uncertain business conditions? To answer this, your company may need to weigh questions such as whether the engagement benefits of a match outweigh the cost of sustaining the program? Is the plan flexible enough to undergo changes in the economy, your workforce, and your business strategy over time?
Enable personalization where you can. This way, employees are likely to feel emergency auto savings can help meet their unique needs. Offering a range of amounts that employees can automatically withdraw is the first step toward personalization. Providing calculators and other educational tools that help employees determine how much they need to save and how much they can afford to save is another personalization tactic.
5. Use Communication Effectively
Top-notch communication techniques can help you drive participation and, importantly, change savings behavior in your workforce.
When asking for participation and engagement, lead with empathy. If there’s one thing the pandemic should have taught us, it’s that one size doesn’t fit all when it comes to supporting employees, who have had many different experiences and have many different needs.
Coordinating communications about the importance of emergency savings with other financial well-being education programs can help get the word out in an immediate and holistic way.
Clarity is Key
Accompany your rollout with extremely clear communications telling employees exactly what they can expect, including:
• How payroll deduction works
• How much — or how little — employees can save in the account
• Calculators, tools, and education efforts designed to help employees determine what they should/can save
• Thorough explanation of any company match offered — how much, how often, and portability
• Which bank, credit union, or other financial institution will run the account?
• How much, if any, interest will be earned
• How withdrawals can be made
• The fact that withdrawals can be made for any reason, no questions asked, with no penalties or tax consequences
• A reminder that if employees leave the company, they may easily transfer the account to their own savings
Meet Employees Where They Are
Make sure effective and thorough communications are available across platforms so you can keep up with your far-flung workforce. Simply posting on the company website and hoping people sign up won’t work, especially in these times when your remote workforce may be feeling more disconnected from corporate communications than ever.
In all communications, make sure you take a multi-platform, consumer-grade, mobile-native technology approach.
6. Take Ongoing Pulse Checks
To determine engagement and any ongoing tweaks that need to be made, you’ll want to establish metrics to measure success at least quarterly. Then you’ll want to benchmark those results against your competitors and national averages to add an “outside-in” perspective.
Solicit employee input on the success of the program in three ways — employee surveys, focus groups with critical talent segments, and analysis of recent departing employees and job candidates who declined an offer.
Metrics can also help you track how well the benefit is supporting business goals. For instance, a customer-service-oriented company may find a higher focus among phone reps and fewer errors when staff is less burdened with financial worries.
These six concepts are designed to help you build a successful, engaging, and effective emergency auto savings plan. By reducing employee stress and increasing productivity and loyalty, you’ll help promote financial well-being in your workforce as well as enhance your company’s total rewards strategy and overall business objectives.
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