This article is reprinted by permission from NerdWallet. The investing information provided on this page is for educational purposes only. NerdWallet, Inc. does not offer advisory or brokerage services, nor does it recommend or advise investors to buy or sell particular stocks, securities or other investments. When I wrote about employer-provided emergency savings accounts four years ago, the idea was still pretty novel. Some companies were experimenting with ways to help their workers save for short-term needs, but the concept wasn’t even on the radar for many employers.
What a difference the pandemic made. Millions were thrown out of work with little warning, and few had the financial reserves to survive even a few months of unemployment. Big employers, and lawmakers, took notice, says Claire Chamberlain, global head of social impact for investment manager BlackRock. The result: Hundreds of thousands of workers now have options to build emergency savings through their employers, and Congress passed laws to encourage more companies to add short-term savings options. “I think a lot of people woke up,” Chamberlain says.Pandemic highlighted Americans’ financial fragility Employers tend to overestimate their workers’ financial stability, says Timothy Flacke, co-founder and executive director of Commonwealth, a nonprofit that promotes financial security. The pandemic brought home the reality that most Americans live paycheck to paycheck, and many have little or no emergency savings. “COVID really changed a lot of things in terms of an employer’s understanding of the day-to-day financial challenges of their people,” Flacke says. But there’s also been a growing awareness that emergency savings are key to financial health, he says. Even a small amount of savings can help families avoid falling behind on bills or turning to high-cost loans. Workers without emergency savings are less likely to contribute to retirement plans, and those with savings are less likely to …
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