The pandemic has given employers and employees a lesson in preparedness. If there’s one takeaway, it’s that employees need to save both in the short term and in the long term – and they need their employers’ help to achieve both.
Emergency savings benefits are an essential weapon in combating employee stress, lack of productivity and distractions at work, which will ultimately help reduce costs for employers. However, as useful and important as these perks are, many employees do not use them because they require too much work on their part.
That’s why the key to the success of an employer-sponsored emergency savings program is automation, according to Devin Miller, CEO of SecureSave, an emergency savings benefits provider and financial expert. Personal, TV Personality and SecureSave Co-Founder Suze Orman.
Read more: How to Support the Financial Health of Your Workforce – Beyond Benefits
“In the 40 years that I’ve been doing this, the first thing I’ve said to everyone is that you need an emergency fund,” Orman said during a panel at the 2021 annual conference of the Society for Human Resource Management. “But, what we’ve discovered over all these years is that people just don’t do it, and why don’t they? Because it’s not automated.
When employers consider an emergency savings plan, they should consider a program similar to how 401 (k) is offered. Most employers automatically enroll employees in a 401 (k), then leave it to individuals to choose their own contributions – but even if they ignore those choices, 401 (k) will still work for them. Emergency savings benefits, Miller explained, should work the same way.
“Employees were shocked to change their priorities around [emergency savings because of the pandemic], “he said.” But the importance of involving employers is that it makes it easier for employees. Unfortunately, people on their own won’t do it.
Read more: Employees could lose $ 700,000 in 401 (k) “forgotten”
An employee has to set up an emergency savings account on their own, including finding the right plan, opening it, and setting everything up for them to make their deposits. Miller’s company, SecureSave, is working with employers to relieve employees of all of this burden.
“You can automate all of that and really make an impact on people,” Miller said, noting that SecureSave sees a 45% adoption rate in these programs and a 95% retention rate. “Make your employee’s life easier. It has to be something that they could just click a single button and just go in and snap into place and that’s what we do. Other programs, although their hearts are in the right place, require the employee to do too much to try to drive these programs.
Some employers might think that providing a 401 (k) is a sufficient investment in the financial security of their employees, but while planning for tomorrow is an essential tool, most employees are more concerned with today’s financial difficulties. .
Read more: Investors focus on retirement savings, but receive little help from employers
“When employees have money in a 401 (k) or an HSA, it’s all the money going to when you retire“Orman said.” At some level, it gives the employee a false sense of security because they think they have all this money, but when a tragedy or emergency does occur, they shouldn’t. not go to his retirement account to pay for his current needs.retirement accounts are for future needs.
According to a study by the Society for Human Resource Management, only 15% of employers offer employees access to emergency funds. Thirty-five percent offer employees help with financial planning and 24% offer financial coaching. Ninety percent of employees served by SecureSave say they would use an emergency savings program if offered by their employer and 90% say they would participate if their employer had a matching 50 $ per year.
Read more: Employees should not be blinded by end-of-life decisions. How the benefits can help ease the burden
“The most important benefit today is one that employers don’t provide,” Orman said. “When employees save in their 401 (k) it really feels good when the market goes up, but when the market goes down it makes them so insecure that they don’t know what to do. What is so fabulous [an emergency savings benefit] does it never descend, unless the employee removes it himself. So this unique piece gives them more security.