How employers help workers save for rainy days

Everyone needs a rainy-day fund; your financial health depends on it. Your employer could help you build one.

Many companies offer 401(k) s and other retirement plans, but until recently few had programs to promote shortterm savings. That’s starting to change, as employers experiment with matching funds, payroll deductions and other methods to encourage workers to build emergency funds.

“This idea of employer-sponsored emergency savings accounts is just gaining traction,” says Brian Nelson Ford, a financial well-being executive at suntrust banks. “I think we’re going to see a lot more of them.”

The need is obvious: 2 out of 5 U.S. adults would have trouble covering a $400 emergency expense, according to the federal reserve. Millions of families live paycheck to paycheck, including some with six-figure incomes.

Even a small rainy-day fund can help cover emergency expenses, reduce stress and avoid costly solutions such as payday loans or raiding retirement funds, says John Thompson, chief program officer at the financial health network, a nonprofit consultancy. A lack of emergency savings can increase financial stress that often spills over into work, with effects including lower productivity and increased absenteeism.

Some of the current employer programs are pretty basic, such as encouraging workers to use split deposit. This direct deposit feature allows you to automatically divide your paycheck between checking and savings accounts, or spread it among accounts at different banks. Any employer that offers direct deposit can offer split deposit, and many do, but employees often don’t know the feature is available.

Other emergency savings programs, known as “sidecar accounts,” are bolted on to existing 401(k) plans. Workers can use payroll deduction to build savings while avoiding minimum balance requirements and account fees that often discourage people from using traditional bank accounts.

Last year, 401(k) provider prudential retirement introduced an emergency savings feature that allows workers to contribute to savings accounts as well as make pretax contributions to their retirement accounts. Workers can withdraw money from the savings account for emergencies, although the portion of the withdrawal that represents earnings on the contributions is subject to income taxes and penalties.

Some employer savings plans offer cash or company matches for meeting financial health goals. Suntrust Banks, for exam