This article was written by Richard Eisenberg for NextAvenue.com on Dec. 3, 2019. Click here to access the full article.
“What exactly is an emergency savings fund?
Winshel said one issue the Emergency Savings Initiative partners will face: What exactly is an emergency savings fund?
“People have different philosophies,” she said. “It’s very important to us that the fund is easily accessible and that you can use it when you need it, unlike a 401(k) plan.”
Meantime, as I’ve written on Next Avenue, some employers and policy makers are looking at ways to take the success 401(k) retirement savings plans and allow employees to set up similar emergency savings funds at work.
A report from the Aspen Institute Financial Security Program’s Leadership Forum on Retirement Savings said pairing a short-term savings plan with a workplace retirement plan is showing promise in marketplace testing “but more regulatory guidance is called for.”
Noted Winshel: “The employer channel is a fantastic option, since the easiest way to save is at the point of transaction.” In other words, if an employee can automatically divert a small portion of a paycheck into a direct-deposit emergency fund, there’s no need to be disciplined enough to take the time and effort to set the money aside. An employer match for emergency savings would be especially enticing.
An AARP Public Policy Institute survey found that 71% of employees said they’d take advantage of a payroll-deduction rainy day savings plan if offered one.”