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A tale of two recoveries. Why emergency savings is the benefit to help.

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By
Devin Miller
January 5, 2021

After the initial consequences of COVID-19 settled in mid-2020, economists and policymakers noted that we were experiencing a “K-shaped” recovery. This “K shape” refers to the divergence of financial outcomes.

Two statistics illustrate this clearly:

1.  The Nasdaq is up nearly 42% since Jan 1, 2020, as sectors like technology boom.

2. 63% have been living paycheck to paycheck in 2020, and 47% say their emergency savings have run out.  These are the Americans who have little if any money saved in their 401(k), they likely do not own a home and are struggling to cover basic expenses.

This K shaped recovery is showing up in benefits as well, with more benefit brokers and executives telling our team at Secure that they are looking more to develop benefits to meet the needs of two distinctly different groups of employees.  The first groups are the employees who are highly compensated, have a robust profile of assets and are thinking long term. The second class of employees are those who are struggling to get by, think short-term and need more immediate and flexible support from benefit programs.

For this latter group of employees, workplace savings programs are largely ineffective. How can a worker living paycheck to paycheck contribute to a 401(k)?

This is where emergency savings comes in and why forward-looking employers are taking notice.  In our research, we have learned that emergency savings support is one of most resonant benefit offerings with employees, second only to health insurance.

Up to 90% say they would participate in an emergency savings program at work if their employer offered it.  And research shows there is literally nothing more effective to help people more quickly recover from financial uncertainty or put them on the path for long term financial success, than having even a few hundred dollars in emergency savings.

Providing emergency savings is not just going to support the recovery of our overall economy, but it’s good business for employers as well.  High impact benefits are benefits employees use and resonate with in large numbers.  Again, nothing resonates better than emergency savings, with the exception of health care, and the impact can be pronounced for employers, with a potential savings of up to $15,000 per employee per year struggling on the down side of the K shaped recovery.  But with emergency savings, unlike healthcare or even 401(k) programs, the administration is simple and the total cost of ownership is relatively low.

As our country enters 2021 and the road to recovery from the lasting impacts of Covid become clear, employers must address the growing disparity created by the K-shaped recovery. By providing an emergency savings program, employers can quickly and easily deploy a high impact solution that speaks directly to the needs of those employees and families most impact by the economic impacts of Covid.

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Devin Miller

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