Employers are helping workers fight against financial fragility

Workers struggling to save for a rainy day are increasingly likely to get help from their employers as the economic slowdown in the pandemic has underscored Americans’ need for a financial cushion.

Large companies like UPS as well as banks, foundations and municipal governments have recently announced programs that encourage workers to set aside cash automatically, via payroll deductions, for unexpected expenses. In some cases, employers match the contributions up to a certain level.

“We’re all much more attuned to how financially fragile we are,” said Timothy Flacke, executive director and co-founder of Commonwealth, a nonprofit group that promotes effective saving solutions. Research from Commonwealth found that people with emergency savings were much less likely to spend their retirement savings during the pandemic.

And research published last week by the AARP Public Policy Institute suggests that having an emergency fund can help not just with short-term costs but also bolster longer-term financial health.

Separately, more than half of working adults surveyed by AARP said they would probably participate in a payroll deduction emergency savings program.

The programs signal that employers are taking seriously a long-recognized problem: Many Americans struggle to save. Repeated surveys by the Federal Reserve have found that many households would find it difficult to pay an unexpected $400 expense.

The pandemic put additional pressure on many families’ finances, highlighting the need for workplace interventions, said Matt Bahl, vice president and head of workplace at the Financial Health Network, a nonprofit organization. “Employer savings programs are ascendant,” Bahl said.

The network and Commonwealth are among several nonprofit groups working to promote savings with funding from the investment manager BlackRock, which last year announced an emergency savings initiative.

It helps that regulators have made it easier for employers and companies that manage workplace benefits to seek permission to automatically enroll workers in emergency savings plans. Employers’ experience with retirement savings plans shows that enrolling workers, and giving them the choice to opt out, is more effective at promoting participation than leaving employees to enroll on their own.

“The hard part in changing behavior is reducing the friction,” said George Barany, director of America Saves, a campaign of the Consumer Federation of America. “The easier it is to start to save, the better.”

Workplace savings programs vary in their approach. Some employers, like UPS, let workers contribute after-tax money into a savings account as part of their401(k) retirement plan. UPS’ program, developed with Commonwealth and managed by Voya Financial, is available to the company ’s 90,000 nonunion employees in the United States. UPS declined to discuss details of the program.

In a statement announcing the program last month, B.J. Dorfman, UPS’ director of global retirement strategy, said, “We value our workers and understand that their financial security is an important element of their success in the workplace and our success as a company.”

Other programs work as stand-alone options. One from SaverLife, a financial technology nonprofit group, offers employees at Alorica, a global customer service provider, a $20 sign-up bonus and then matches employee contributions up to $40 a month.

So a worker who saves

$240 over six months will end up with a balance of

$500. The employee must save at least $10 a month to get the match.

Participants link the SaverLife program to their own savings account and choose how much they want to save, said Letisha Lamb, director of employee experience at Alorica. The program encourages seasonal goals, like saving refunds during tax time or saving for gifts during the holidays.

Becky Dillon, 30, a customer service representative at Alorica, said that she had struggled to save but that SaverLife helped get her in the habit. “I realized I needed to save money,” she said, so she cut out fast-food meals and saved the money instead.

Dillon said she liked that SaverLife let her choose the amount to save — typically,

$50 a month — and that there was no penalty if she had to skip a month. Before the pandemic hit, she had saved more than $300. The funds helped cover extra expenses that cropped up during the shutdown, like the cost of faster internet service so that her 9-year-old daughter could take classes at home.

“It’ s your pace, your goals,” Dillon said.

The latest research suggests that, especially for lower- and moderate-income workers, setting modest goals — say, $500, or a few weeks of take-home pay — is more realistic than aiming for the traditional three to six months of takehome pay, which may be too daunting. Recent findings from the Urban Institute suggested that a reserve of just $250 could help families stave off high-interest debt and even eviction.