Almost 2 in 10 Workers Have an Emergency Savings Account Through Work. Here’s Why You Should Offer One to Your Employees

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Setting your employees up with emergency savings could benefit them and you. Read on to learn more. [[{“value”:”

Life has a way of surprising people financially — and not always in a good way. That’s why it’s important to maintain a solid emergency fund at all times. You never know when something like a home repair, car problem, or medical issue might wreak financial havoc.

But in a recent survey by the Employee Benefit Research Institute, only 4 in 10 workers feel at least somewhat prepared to handle an emergency expense of $5,000. What’s more, 3 in 10 workers say they feel ill-prepared to cover a $500 expense that’s unexpected.

Now, it used to be workers’ sole responsibility to save money for unplanned bills. But thanks to a recent change, workplaces can help by offering emergency savings accounts to their employees.

But in the aforementioned survey, only about 2 in 10 workers report that they’re currently offered an emergency savings account at work. So that’s one perk your business may want to strongly consider.

How you can help your employees save

The SECURE 2.0 Act changed several rules related to retirement savings and savings in general. And one thing it did was allow for the establishment of pension-linked emergency savings accounts, which are short-term savings accounts that are maintained as part of individual retirement plans, like 401(k)s.

Employers have several options when offering these emergency savings accounts. They can enroll workers automatically, make contributions to these savings accounts on workers’ behalf, or allow workers to contribute through payroll deductions, the same way 401(k) plans are typically funded.

Employers can allow employees to allocate up to $2,500 a year for emergency savings account contributions. And unlike 401(k) withdrawals, which can incur a 10% penalty when taken before age 59 1/2, there are no penalties associated with taking withdrawals from an emergency savings account. This gives your employees access to money they can truly tap in a pinch.

Everyone stands to win with emergency savings

If you don’t currently have an emergency savings account on offer for your employees, you may want to consider one. The benefit to your workers is obvious — they get access to money they can use when unplanned bills arise. But as a small business owner, you can benefit, too.

When workers are less stressed about finances, it tends to result in better productivity. And the more short-term savings they have, the less stressed they’re apt to be about sudden bills.

Also, offering this benefit could be a great way to retain employees who might otherwise jump ship for better benefits and pay. There’s a cost involved in hiring and onboarding staff, so keeping your current workers happy could benefit your company financially. That way, you don’t have to go through the hassle of replacing people as often.

Plus, if you’re able to offer an emergency savings account to your workers, it’s just plain the right thing to do if you care about the people you employ. So it pays to review your company’s finances and see if an emergency savings account is something you can start to provide and perhaps even contribute to as well.

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