Delta Is Hooking Up Workers With $1,000 for Emergency Savings

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Many people lack savings for unplanned expenses. Read on to see how one employer is changing that. 

What happened

Delta Air Lines is giving employees up to $1,000 so they can boost their personal cash reserves. It’s estimated that more than 90,000 of the airline’s workers are eligible for this benefit.

So what

Employers have long upheld the practice of sponsoring 401(k) plans for retirement savings purposes and matching employee contributions to some degree. The problem is that these savings are restricted, and penalties are imposed for taking withdrawals prior to age 59 ½. This leaves workers with a 401(k) few good options in the event of a near-term financial emergency.

But the recently passed Secure 2.0 Act allows employers to offer eligible employees the option to link their retirement savings to an emergency savings account. Employees can make after-tax contributions of up to $2,500, and employers can opt to fund those accounts on their workers’ behalf.

Delta is making such a program available to all employees below the director level. Workers will receive $750 directly deposited into a Fidelity account after undergoing a financial coaching session. Delta will then match up to $250 of employee contributions per account for a total of $1,000.

“The ability for an employer to help their employees to feel they have solutions in place to manage their overall finances is really important,” said Katie Taylor, vice president of planning and engagement at Fidelity Investments.

Now what

Recent data from SecureSave, a company that partners with employers to offer emergency savings accounts to employees, found that 63% of Americans don’t have the cash reserves to cover a $500 surprise expense. As such, Delta’s $1,000 emergency fund could serve as a lifeline for people who would otherwise be at risk of costly debt in the face of unplanned bills.

For many people, an absence of savings means instant credit card debt when unexpected expenses arise. That could lead to loads of money lost to interest charges. Excessive amounts of credit card debt can also cause credit score damage, making it harder for people in that boat to borrow affordably in a pinch.

Of course, a $1,000 emergency fund is a step in the right direction for those without savings at all. But ideally, workers should aim for enough emergency savings to cover three months of essential bills. That way, those who find themselves unable to work or unemployed won’t automatically have to resort to debt.

However, building a complete emergency fund takes time. The fact that Delta is making it possible to go from $0 in savings to $1,000 in short order is a definite plus.

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

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