The ‘extremely simple’ benefit you should be offering employees
While financial wellness programs have been a hot benefit trend for the past few years—helping employees pay off or refinance debt and improve spending habits—taking actionable steps to help employees build emergency savings accounts is still not a priority for many employers.
Access to emergency funds is one of the biggest pieces of financial health, and helping workers build their savings is actually one of the simplest things to do, says Melissa Gopnik, senior vice president at Commonwealth, a Boston-based financial nonprofit.
Doing so by encouraging employees to use a split deposit—which can put some of a worker’s paycheck directly into a savings account—can make a significant impact on the workforce. The idea hasn’t been embraced by many employers, she says—or it’s offered but not well-communicated.
“It seems obvious, but no one has thought about emergency savings as a benefit an employer offers,” says Gopnik, who will speak about the topic at HRE’s Health & Benefits Leadership Conference in April in Las Vegas.
That may soon change as more employers consider the idea, while ultimately realizing that employees who are financially stressed can have a negative impact on productivity, presenteeism and more.
Gopnik sat down with Human Resource Executive to discuss how split deposits work, why employers should offer them as a benefit and why financial wellness matters.
HRE: Emergency savings is such a simple concept, but we hear all these horrible statistics about how employees don’t have them—like how 40% of Americans don’t have $400 in the bank for emergency expenses. Why is this an important focus, and what’s the best way for employers to help address this?
Gopnik: What financial wellness is depends on who you ask, but people forget about the basics of what it takes to be financially well, like emergency funds and managing debt.
Emergency savings are so important: I get a flat tire, it’s not the end of the world for me. Or if my kids’ soccer cleats fall apart, I’m OK. Half of the people in this country don’t have an emergency fund, and it’s just mind-boggling. Everyone you talk to knows they should, but it’s hard. We just did a study that [shows that] split deposit is actually one of the best predictors of if you have an emergency deposit. Everyone offers split deposit, but who is thinking of that as a benefit?
HRE: I hear about financial wellness all the time, but I don’t hear about split deposit as an employee benefit often. Is it a fairly new idea?
Gopnik: It’s new and old at the same time. We’ve been shouting this across the rooftops for a while now, but I think it’s finally catching on. I think more employees are understanding that if they don’t have an emergency fund, they won’t be able to save for retirement. Or they’ll put money into retirement, but then they’ll take out a loan. So what’s the use of that?
HRE: Walk me through how that works in terms of it being a benefit.
Gopnik: It’s surprisingly simple. Employees can take some of their paycheck and put in into a savings account, if they have one. The two times [employers] can easily talk about it are onboarding and when employees get a raise. In onboarding, [employers] usually tell employees to bring a voided check. But why don’t they say, “Also bring your savings account information?” It’s little things like that.
HRE: So it’s a lot about employers communicating how this works.
Gopnik: The messaging is very important and very simple. Imagine the message: “At Company Y, we believe it’s important you have emergency funds and we care about that. Remember to bring in your savings account information.” Or, “We have a prize for everyone who saves,” or we give a match. It’s part of your company culture to care about them, and it doesn’t cost anything to ramp up how you talk about this.
Or what about when you get a raise: Usually they will say, “Congratulations, you got a raise! You’re a great employee.” What if you say: “Congratulations, you got a raise. You’re a great employee and we care about you, so now’s the time to think about your financial future. Have you thought about a split deposit? Or increasing retirement?” Or however you want to phrase it.
HRE: Have you talked to employers about doing this? How are they reacting?
Gopnik: We talk to employers and employees and get to know them so we can figure out what kind of financial health focus is best. We have nothing to sell; we just want to come up with something that works.
One large company was giving raises to some of their lower-wage workers. The HR folks said to us, “Our big problem is 401(k) loans.” So we talked to workers and asked, “Why are you doing that?” They said, “We have emergencies and we have no way of paying for them. And we’re refinancing debt through the 401(k) loans.” So we then designed a really simple communication for this employer around the time of the raise about using split deposit, and they saw a significant increase of the number of workers who split their deposit.
It seems obvious, but no one has thought about emergency savings as a benefit an employer offers.
HRE: How is it usually split?
Gopnik: For lower-wage workers, it’s really important that it’s easy for them to change back and forth because their lives are very volatile. So it’s up to the person. You can make suggestions. [It’s good for employers] to give suggestions, like 10% of your raise or half your raise. It makes it easy.
HRE: Can employers supplement these savings, or have you seen that happen? Say, ‘If you do this, we’ll add in that,’ kind of like a 401(k)?
Gopnik: Like a 401(k)—absolutely. They can offer an incentive. People do this already for 401(k) savings or health savings accounts—they add in their own contribution. This is newer to do it for emergency funds, but there’s no reason why you can’t. It’s the mindset of thinking of financial security as something you can think about. People think it’s a poor people problem, but it’s not. It’s a middle-class problem. It’s not just about having $40 in the bank; it’s about what having that in savings can make you feel like—what having some emergency savings can make you feel like you can do next [in your financial health journey].
Gopnik will be speaking April 16 at HRE’s Health & Benefits Leadership Conference. To register—and for more information—visit benefitsconf.com. The event will take place April 15-17 at the Aria Resort & Casino in Las Vegas.