Emergency savings: A ‘gateway drug’ to better retirement savings

Most benefits leaders are familiar with the recent troublesome research on employee financial wellness, particularly that a majority of workers don’t have $400 in emergency savings.

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While emergency savings is often framed as the amount employees should sock away in the event of a job loss—to cover several months of lost salary, for instance—it also encompasses the funds to cover unexpected small expenses: a broken appliance, a new coat for a child, a higher-than-expected gas price. And that is what employees today most need help with, Nick Maynard, senior vice president of Commonwealth, said at Thursday’s Health & Benefits Leadership Conference.

“That’s a big missing piece of the puzzle” of employee financial wellness, he says, “and it’s what employees are looking for.”

Nick Maynard, Commonwealth
Nick Maynard, Commonwealth

Emergency savings accounts aren’t necessarily vehicles for employees to amass significant savings, he says; instead, employees should work—with the support of their employer—to add small amounts, tap the account when needed and then replenish it.

“And if you don’t have that emergency savings fund, guess where people turn? Found money—often, the retirement plan,” he says. “So, if you offer a retirement plan today, you’re already in the emergency savings benefits business.”

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On the other hand, if employees have a cushion in the way of emergency savings—and, importantly, Maynard says, have learned to develop the behaviors that allow them to put away small amounts—they’re more likely to contribute to their retirement savings.

“Emergency savings is like a gateway drug,” Maynard says. “If you build this sense that you have savings, you’ll be more willing to put more aside for the long-term because you have that short-term stuff dealt with.”

Maynard shared a number of employers that Commonwealth worked with to develop their emergency savings programs:

Best Buy

The model the tech retailer rolled out is considered out-of-plan—the emergency savings account was set up at partner Wings Credit Union and is separate from the retirement plan.

It was structured as a “prize-linked savings program,” with a $100 incentive for financial education and four $250 drawings a month for those who enroll. The company utilized promotions during America Saves Week and included messaging about the program in its onboarding and open enrollment materials. It also worked with existing benefits ambassadors to raise awareness.

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In surveying its 100,000 non-union employees, UPS found a need for emergency savings and ultimately leveraged its 401(k) platform with Voya to offer that option—a model that, Maynard says, brings emergency savings and retirement savings much closer together. Plan designers relied on the after-tax account option already in the retirement plan—previously positioned as a catchup tool, particularly for older workers—which it transformed into an emergency savings fund.

Commonwealth created an email and direct mail campaign about the program and helped UPS launch a new landing page just for the program. UPS saw 23,000 visitors to that page in the first year and a 40% open rate for emails.

Ultimately, there was a 39% increase in after-tax participation, with 4,155 employees newly contributing.

“Some people are worried, ‘If we do emergency savings too close to retirement, will it be like robbing Peter to pay Paul and people won’t put as much in retirement?’ ” he says, noting that, among those who contributed to the emergency savings account, there was a positive or neutral impact on their likelihood to contribute to retirement savings.


As Commonwealth surveyed the auto retailer’s employees about their emergency savings preferences, it found a fairly even split between those who wanted emergency and retirement savings close—and those who didn’t. So, the company ultimately offered its employees three options.

They could have a separate, after-tax emergency account alongside their retirement account with Voya—like what UPS did. AutoNation also offered them the ADP Wisely card, which can be funded through payroll contributions and is separate from retirement savings. They also had the option for a split deposit from payroll—to divide their income between checking and savings accounts.

It’s important for employers thinking about offering a new—or strengthening an existing—emergency savings program to consider all of the options on the market, Maynard says, and ensure that they line up with the unique needs of your employee population.

Because if employers aren’t attuned to what their employees need and want, they could be causing them to miss out on important opportunities for immediate and long-term savings.

“You can get stuck in these conversations where employers say, ‘We offered them a bank account but they didn’t take it so they just must not be able to save.’ But it turns out that the product—the access point—matters a ton.”

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Jen Colletta
Jen Colletta is managing editor at HRE. She earned bachelor's and master's degrees in writing from La Salle University in Philadelphia and spent 10 years as a newspaper reporter and editor before joining HRE. She can be reached at [email protected].